UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES ACT OF 1934

For the Quarterly Period Ended ~~September 30, 2020~~March 31, 2021

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number 0-18082

GREAT SOUTHERN BANCORP, INC.

(Exact name of registrant as specified in its charter)

Maryland		43-1524856
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

1451 E. Battlefield,Springfield,Missouri		65804
(Address of principal executive offices)		(Zip Code)

(417)887-4400
(~~Registrant's~~Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act.


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock,
par value $0.01 per share	GSBC	The NASDAQ Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes ~~/X/~~⌧ No ~~/ /~~

◻

Indicate by check mark whether the registrant has submitted electronically every Interactive Data file required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ~~Yes/X/~~Yes ⌧ No ~~/ /~~

◻

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer ~~/ /~~◻	Accelerated filer ~~/X/~~⌧
Non-accelerated filer ~~/ /~~◻	Smaller reporting company ☐
	Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ~~[ ]~~

◻

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ☐ No ~~/X/~~

⌧

The number of shares outstanding of each of the ~~registrant's~~registrant’s classes of common stock: ~~13,844,270~~13,715,271 shares of common stock, par value ~~$0.01~~$.01 per share, outstanding at ~~November 4, 2020.~~May 3, 2021.

PART I FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS.

GREAT SOUTHERN BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

(In thousands, except number of shares)


	MARCH 31,		DECEMBER 31,
	2021		2020

	(Unaudited)

ASSETS
Cash	$	95,102	$	92,403
Interest-bearing deposits in other financial institutions		517,454		471,326
Cash and cash equivalents		612,556		563,729
Available-for-sale securities		457,668		414,933
Mortgage loans held for sale		30,492		17,780
Loans receivable, net of allowance for credit losses of $67,702 – March 2021; net of allowance for loan losses of $55,743 - December 2020		4,285,737		4,296,804
Interest receivable		13,027		12,793
Prepaid expenses and other assets		43,009		58,889
Other real estate owned and repossessions, net		1,851		1,877
Premises and equipment, net		137,684		139,170
Goodwill and other intangible assets		6,655		6,944
Federal Home Loan Bank stock and other interest-earning assets		6,655		9,806
Current and deferred income taxes		8,436		3,695
Total Assets	$	5,603,770	$	5,526,420

LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Deposits	$	4,626,936	$	4,516,903
Securities sold under reverse repurchase agreements with customers		140,666		164,174
Short-term borrowings and other interest-bearing liabilities		2,636		1,518
Subordinated debentures issued to capital trust		25,774		25,774
Subordinated notes		148,580		148,397
Accrued interest payable		2,444		2,594
Advances from borrowers for taxes and insurance		7,909		7,536
Accrued expenses and other liabilities		29,351		29,783
Liability for unfunded commitments		8,017		—
Total Liabilities		4,992,313		4,896,679

Stockholders' Equity:
Capital stock
Serial preferred stock - $.01 par value; authorized 1,000,000 shares; issued and outstanding March 2021 and December 2020 - - 0- shares		—		—
Common stock, $.01 par value; authorized 20,000,000 shares; issued and outstanding March 2021 –13,693,644 shares; December 2020 – 13,752,605 shares		137		138
Additional paid-in capital		35,661		35,004
Retained earnings		537,969		541,448
Accumulated other comprehensive income		37,690		53,151
Total Stockholders' Equity		611,457		629,741
Total Liabilities and Stockholders' Equity	$	5,603,770	$	5,526,420

SEPTEMBER 30,

DECEMBER 31,

2020

2019

(Unaudited)

ASSETS

Cash
$
91,098

$
99,299

Interest-bearing deposits in other financial institutions

247,168

120,856

Cash and cash equivalents

338,266

220,155

Available-for-sale securities

445,940

374,175

Mortgage loans held for sale

23,973

9,242

Loans receivable, net of allowance for loan losses of $54,238 - September 2020; $40,294 - December 2019

4,413,764

4,153,982

Interest receivable

14,139

13,530

Prepaid expenses and other assets

44,671

74,984

Other real estate owned and repossessions, net

3,007

5,525

Premises and equipment, net

140,502

141,908

Goodwill and other intangible assets

7,232

8,098

Federal Home Loan Bank stock and other interest-earning assets

11,036

13,473

Current and deferred income taxes

480

-

          Total Assets
$
5,443,010

$
5,015,072

LIABILITIES AND STOCKHOLDERS' EQUITY

Liabilities:

Deposits
$
4,443,757

$
3,960,106

Securities sold under reverse repurchase agreements with customers

155,042

84,167

Short-term borrowings and other interest-bearing liabilities

1,218

228,157

Subordinated debentures issued to capital trust

25,774

25,774

Subordinated notes

148,217

74,276

Accrued interest payable

2,859

4,250

Advances from borrowers for taxes and insurance

11,841

7,484

Accrued expenses and other liabilities

29,659

24,904

Current and deferred income taxes

-

2,888

          Total Liabilities

4,818,367

4,412,006

Commitments and Contingencies

-

-

Stockholders' Equity:

Capital stock

Serial preferred stock - $0.01 par value; authorized 1,000,000 shares; issued
and outstanding September 2020 and December 2019 - - 0- shares

-

-

Common stock, $0.01 par value; authorized 20,000,000 shares; issued and outstanding September 2020 – 13,880,570 shares; December 2019 - 14,261,052 shares

139

143

Additional paid-in capital

34,539

33,510

Retained earnings

534,331

537,167

Accumulated other comprehensive income

55,634

32,246

          Total Stockholders' Equity

624,643

603,066

          Total Liabilities and Stockholders' Equity
$
5,443,010

$
5,015,072

See Notes to Consolidated Financial Statements

GREAT SOUTHERN BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(In thousands, except per share data)

THREE MONTHS ENDED
SEPTEMBER 30,

2020

2019

(Unaudited)

INTEREST INCOME

Loans
$
50,476

$
57,226

Investment securities and other

3,123

2,961

TOTAL INTEREST INCOME

53,599

60,187

INTEREST EXPENSE

Deposits

7,094

11,792

Short-term borrowings and repurchase agreements

8

1,123

Subordinated debentures issued to capital trust

128

253

Subordinated notes

2,201

1,095

TOTAL INTEREST EXPENSE

9,431

14,263

NET INTEREST INCOME

44,168

45,924

PROVISION FOR LOAN LOSSES

4,500

1,950

NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES

39,668

43,974

NON-INTEREST INCOME

Commissions

318

173

Service charges, debit card and ATM fees

4,692

5,619

Net gains on loan sales

2,878

1,021

Late charges and fees on loans

352

364

Gain (loss) on derivative interest rate products

89

(101
)
Other income

1,137

1,579

TOTAL NON-INTEREST INCOME

9,466

8,655

NON-INTEREST EXPENSE

Salaries and employee benefits

18,701

15,827

Net occupancy and equipment expense

7,147

6,613

Postage

748

792

Insurance

753

339

Advertising

757

794

Office supplies and printing

271

258

Telephone

987

904

Legal, audit and other professional fees

582

681

Expense on other real estate and repossessions

199

603

Partnership tax credit investment amortization

-

91

Acquired deposit intangible asset amortization

289

289

Other operating expenses

1,554

1,534

TOTAL NON-INTEREST EXPENSE

31,988

28,725

INCOME BEFORE INCOME TAXES

17,146

23,904

PROVISION FOR INCOME TAXES

3,692

4,172

NET INCOME AND NET INCOME AVAILABLE TO COMMON STOCKHOLDERS
$
13,454

$
19,732

Basic Earnings Per Common Share
$
0.96

$
1.39

Diluted Earnings Per Common Share
$
0.96

$
1.38

Dividends Declared Per Common Share
$
0.34

$
0.34

	THREE MONTHS ENDED
	MARCH 31,
	2021		2020

	(Unaudited)
INTEREST INCOME
Loans	$	47,709	$	54,130
Investment securities and other		2,924		3,344
TOTAL INTEREST INCOME		50,633		57,474

INTEREST EXPENSE
Deposits		4,222		10,577
Short-term borrowings and repurchase agreements		9		649
Subordinated debentures issued to capital trust		113		216
Subordinated notes		2,200		1,094
TOTAL INTEREST EXPENSE		6,544		12,536

NET INTEREST INCOME		44,089		44,938
PROVISION FOR CREDIT LOSSES ON LOANS		300		3,871
PROVISION (CREDIT) FOR UNFUNDED COMMITMENTS		(674)		—
NET INTEREST INCOME AFTER PROVISION FOR CREDIT LOSSES AND PROVISION (CREDIT) FOR UNFUNDED COMMITMENTS		44,463		41,067

NON-INTEREST INCOME
Commissions		282		266
Service charges, debit card and ATM fees		4,802		4,758
Net gains on loan sales		2,688		590
Late charges and fees on loans		301		355
Gain (loss) on derivative interest rate products		474		(407)
Other income		1,189		1,805
TOTAL NON-INTEREST INCOME		9,736		7,367

NON-INTEREST EXPENSE
Salaries and employee benefits		17,120		18,169
Net occupancy and equipment expense		7,062		6,766
Postage		878		769
Insurance		760		382
Advertising		585		620
Office supplies and printing		277		235
Telephone		881		912
Legal, audit and other professional fees		647		598
Expense on other real estate and repossessions		268		479
Partnership tax credit investment amortization		25		—
Acquired deposit intangible asset amortization		289		289
Other operating expenses		1,529		1,596
TOTAL NON-INTEREST EXPENSE		30,321		30,815

INCOME BEFORE INCOME TAXES		23,878		17,619
PROVISION FOR INCOME TAXES		5,010		2,751
NET INCOME AND NET INCOME AVAILABLE TO COMMON STOCKHOLDERS	$	18,868	$	14,868
Basic Earnings Per Common Share	$	1.38	$	1.05
Diluted Earnings Per Common Share	$	1.36	$	1.04
Dividends Declared Per Common Share	$	0.34	$	1.34

See Notes to Consolidated Financial Statements

~~GREAT SOUTHERN BANCORP, INC. AND SUBSIDIARIES~~

~~CONSOLIDATED STATEMENTS OF INCOME~~

~~(In thousands, except per share data)~~

NINE MONTHS ENDED
SEPTEMBER 30,

2020

2019

(Unaudited)

INTEREST INCOME

Loans
$
155,453

$
167,552

Investment securities and other

9,631

8,715

TOTAL INTEREST INCOME

165,084

176,267

INTEREST EXPENSE

Deposits

26,712

33,844

Short-term borrowings and repurchase agreements

667

2,904

Subordinated debentures issued to capital trust

511

787

Subordinated notes

4,633

3,283

TOTAL INTEREST EXPENSE

32,523

40,818

NET INTEREST INCOME

132,561

135,449

PROVISION FOR LOAN LOSSES

14,371

5,500

NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES

118,190

129,949

NON-INTEREST INCOME

Commissions

760

670

Service charges, debit card and ATM fees

13,590

15,887

Net gains on loan sales

5,308

1,645

Late charges and fees on loans

1,175

1,066

Net realized gains on sales of available-for-sale securities

78

10

Loss on derivative interest rate products

(424
)

(169
)
Other income

4,606

4,154

TOTAL NON-INTEREST INCOME

25,093

23,263

NON-INTEREST EXPENSE

Salaries and employee benefits

53,699

46,895

Net occupancy and equipment expense

20,619

19,462

Postage

2,294

2,342

Insurance

1,668

1,667

Advertising

1,814

2,162

Office supplies and printing

806

743

Telephone

2,904

2,645

Legal, audit and other professional fees

1,844

2,023

Expense on other real estate and repossessions

946

1,642

Partnership tax credit investment amortization

-

274

Acquired deposit intangible asset amortization

866

902

Other operating expenses

4,691

4,845

TOTAL NON-INTEREST EXPENSE

92,151

85,602

INCOME BEFORE INCOME TAXES

51,132

67,610

PROVISION FOR INCOME TAXES

9,607

11,890

NET INCOME AND NET INCOME AVAILABLE TO COMMON STOCKHOLDERS
$
41,525

$
55,720

Basic Earnings Per Common Share
$
2.94

$
3.93

Diluted Earnings Per Common Share
$
2.93

$
3.90

Dividends Declared Per Common Share
$
2.02

$
1.73

~~See Notes to Consolidated Financial Statements~~

GREAT SOUTHERN BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In ~~thousands)~~thousands, except per share data)

	THREE MONTHS ENDED MARCH 31,
	2021		2020

	(Unaudited)
Net Income	$	18,868	$	14,868

Unrealized appreciation (depreciation) on available-for-sale securities, net of taxes (credit) of $(4,109) and $3,411, for 2021 and 2020, respectively		(13,915)		11,549

Change in fair value of cash flow hedge, net of taxes of $0 and $3,519, for 2021 and 2020, respectively		—		11,914

Amortization of realized gain on termination of cash flow hedge, net of taxes (credit) of $(457) and $(147), for 2021 and 2020, respectively		(1,546)		(498)

Comprehensive Income	$	3,407	$	37,833

THREE MONTHS ENDED
SEPTEMBER 30,

2020

2019

(Unaudited)

Net Income
$
13,454

$
19,732

Unrealized appreciation (depreciation) on available-for-sale securities, net of taxes (credit) of $(531) and $1,315, for 2020 and 2019, respectively

(1,796
)

4,452

Change in fair value of cash flow hedge, net of taxes of $0 and $1,318, for 2020 and 2019, respectively

-

4,461

Amortization of realized gain on termination of cash flow hedge, net of taxes (credit) of $467 and $0, for 2020 and 2019, respectively

(1,581
)

-

Comprehensive Income
$
10,077

$
28,645

NINE MONTHS ENDED
SEPTEMBER 30,

2020

2019

(Unaudited)

Net Income
$
41,525

$
55,720

Unrealized appreciation on available-for-sale securities, net of taxes of $4,482 and $3,732, for 2020 and 2019, respectively

15,177

12,642

Reclassification adjustment for gains included in net income, net of taxes (credit) of
$18 and $2, for 2020 and 2019, respectively

(60
)

(8
)

Change in fair value of cash flow hedge, net of taxes of $3,519 and $5,549, for 2020 and 2019, respectively

11,914

18,789

Amortization of realized gain on termination of cash flow hedge, net of taxes (credit) of $(1,075) and $0, for 2020 and 2019, respectively

(3,643
)

-

Comprehensive Income
$
64,913

$
87,143

See Notes to Consolidated Financial Statements

GREAT SOUTHERN BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(In thousands, except per share data)

THREE MONTHS ENDED SEPTEMBER 30, 2019

Accumulated

Other

Common

Additional

Retained

Comprehensive

Treasury

Stock

Paid-in Capital

Earnings

Income (Loss)

Stock

Total

(Unaudited)

Balance, June 30, 2019
$
142

$
31,603

$
508,427

$
32,137

$
-

$
572,309

Net income

-

-

19,732

-

-

19,732

Stock issued under Stock Option

Plan

-

482

-

-

167

649

Common dividends declared,

-

-

(4,833)

-

-

(4,833)

$0.34 per share

Other comprehensive gain

-

-

-

8,913

-

8,913

Reclassification of treasury stock

per Maryland law

-

-

167

-

(167)

-

Balance, September 30, 2019
$
142

$
32,085

$
523,493

$
41,050

$
-

$
596,770

THREE MONTHS ENDED SEPTEMBER 30, 2020

Accumulated

Other

Common

Additional

Retained

Comprehensive

Treasury

Stock

Paid-in Capital

Earnings

Income (Loss)

Stock

Total

(Unaudited)

Balance, June 30, 2020
$
141

$
34,230

$
533,346

$
59,011

$
-

$
626,728

Net income

-

-

13,454

-

-

13,454

Stock issued under Stock Option

Plan

-

309

-

-

37

346

Common dividends declared,

-

-

(4,790)

-

-

(4,790)

$0.34 per share

Other comprehensive loss

-

-

-

(3,377)

-

(3,377)

Purchase of the Company’s common stock

-

-

-

-

(7,718)

(7,718)

Reclassification of treasury stock

per Maryland law

(2)

-

(7,679)

-

7,681

-

Balance, September 30, 2020
$
139

$
34,539

$
534,331

$
55,634

$
-

$
624,643


	THREE MONTHS ENDED MARCH 31, 2020
							Accumulated
							Other
	Common		Additional		Retained		Comprehensive		Treasury
	Stock		Paid-in Capital		Earnings		Income (Loss)		Stock		Total

	(Unaudited)
Balance, January 1, 2020	$	143	$	33,510	$	537,167	$	32,246	$	—	$	603,066
Net income		—		—		14,868		—		—		14,868
Stock issued under Stock Option Plan		—		448		—		—		87		535
Common dividends declared, $1.34 per share		—		—		(19,054)		—		—		(19,054)
Other comprehensive gain		—		—		—		22,965		—		22,965
Purchase of the Company’s common stock		—		—		—		—		(8,148)		(8,148)
Reclassification of treasury stock per Maryland law		(2)		—		(8,059)		—		8,061		—
Balance, March 31, 2020	$	141	$	33,958	$	524,922	$	55,211	$	—	$	614,232


	THREE MONTHS ENDED MARCH 31, 2021
							Accumulated
							Other
	Common		Additional		Retained		Comprehensive		Treasury
	Stock		Paid-in Capital		Earnings		Income (Loss)		Stock		Total

	(Unaudited)
Balance, January 1, 2021	$	138	$	35,004	$	541,448	$	53,151	$	—	$	629,741
Net income		—		—		18,868		—		—		18,868
Impact of ASU 2016-13 adoption		—		—		(14,175)		—		—		(14,175)
Stock issued under Stock Option Plan		—		657		—		—		263		920
Common dividends declared, $0.34 per share		—		—		(4,656)		—		—		(4,656)
Other comprehensive loss		—		—		—		(15,461)		—		(15,461)
Purchase of the Company’s common stock		—		—		—		—		(3,780)		(3,780)
Reclassification of treasury stock per Maryland law		(1)		—		(3,516)		—		3,517		—
Balance, March 31, 2021	$	137	$	35,661	$	537,969	$	37,690	$	—	$	611,457

See Notes to Consolidated Financial Statements

NINE MONTHS ENDED SEPTEMBER 30, 2019

Accumulated

Other

Common

Additional

Retained

Comprehensive

Treasury

Stock

Paid-in Capital

Earnings

Income (Loss)

Stock

Total

(Unaudited)

Balance, January 1, 2019
$
142

$
30,121

$
492,087

$
9,627

$
-

$
531,977

Net income

-

-

55,720

-

-

55,720

Stock issued under Stock Option

Plan

-

1,964

-

-

1,059

3,023

Common dividends declared,

-

-

(24,524)

-

-

(24,524)

$1.39 per share

Purchase of the Company’s common stock

-

-

-

-

(849)

(849)

Other comprehensive gain

-

-

-

31,423

-

31,423

Reclassification of treasury stock

per Maryland law

-

-

210

-

(210)

-

Balance, September 30, 2019
$
142

$
32,085

$
523,493

$
41,050

$
-

$
596,770

NINE MONTHS ENDED SEPTEMBER 30, 2020

Accumulated

Other

Common

Additional

Retained

Comprehensive

Treasury

Stock

Paid-in Capital

Earnings

Income (Loss)

Stock

Total

(Unaudited)

Balance, January 1, 2020
$
143

$
33,510

$
537,167

$
32,246

$
-

$
603,066

Net income

-

-

41,525

-

-

41,525

Stock issued under Stock Option

Plan

-

1,029

-

-

133

1,162

Common dividends declared,

-

-

(28,631)

-

-

(28,631)

$2.02 per share

Other comprehensive gain

-

-

-

23,388

-

23,388

Purchase of the Company’s common stock

-

-

-

-

(15,867)

(15,867)

Reclassification of treasury stock

per Maryland law

(4)

-

(15,730)

-

15,734

-

Balance, September 30, 2020
$
139

$
34,539

$
534,331

$
55,634

$
-

$
624,643

~~See Notes to Consolidated Financial Statements~~

GREAT SOUTHERN BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

NINE MONTHS ENDED
SEPTEMBER 30,

2020

2019

(Unaudited)

CASH FLOWS FROM OPERATING ACTIVITIES

Net income
$
41,525

$
55,720

Proceeds from sales of loans held for sale

220,910

81,403

Originations of loans held for sale

(228,836
)

(88,864
)
Items not requiring (providing) cash:

Depreciation

7,478

7,076

Amortization

1,344

1,566

Compensation expense for stock option grants

837

667

Provision for loan losses

14,371

5,500

Net gains on loan sales

(5,308
)

(1,645
)
Net realized gains on sales of available-for-sale securities

(78
)

(10
)
Net (gains) losses on sale of premises and equipment

19

(24
)
Net losses on sale/write-down of other real estate owned and repossessions

31

205

Accretion of deferred income, premiums, discounts and other

(4,076
)

(2,949
)
Loss on derivative interest rate products

424

169

Deferred income taxes

(12,400
)

(193
)
Changes in:

Interest receivable

(984
)

(253
)
Prepaid expenses and other assets

311

(1,940
)
Accrued expenses and other liabilities

(1,912
)

3,333

Income taxes refundable/payable

2,124

4,414

Net cash provided by operating activities

35,780

64,175

CASH FLOWS FROM INVESTING ACTIVITIES

Net change in loans

(268,313
)

(123,401
)
Purchase of loans

(3,675
)

(57,545
)
Purchase of premises and equipment

(6,609
)

(8,274
)
Proceeds from sale of premises and equipment

527

172

Proceeds from sale of other real estate owned and repossessions

3,461

12,867

Capitalized costs on other real estate owned

(126
)

(93
)
Proceeds from termination of interest rate derivative

45,864

-

Proceeds from sales of available-for-sale securities

19,236

28,057

Proceeds from maturities and calls of available-for-sale securities

26,940

13,370

Principal reductions on mortgage-backed securities

19,650

12,788

Purchase of available-for-sale securities

(118,296
)

(143,151
)
Redemption of Federal Home Loan Bank stock and change in
other interest-earning assets

2,437

673

Net cash used in investing activities

(278,904
)

(264,537
)
CASH FLOWS FROM FINANCING ACTIVITIES

Net increase (decrease) in certificates of deposit

(210,626
)

136,194

Net increase in checking and savings deposits

694,288

73,995

Net decrease in short-term borrowings

(156,064
)

(4,293
)
Advances from borrowers for taxes and insurance

4,357

5,313

Proceeds from issuance of subordinated notes

73,513

-

Dividends paid

(28,691
)

(24,219
)
Purchase of the Company’s common stock

(15,867
)

(849
)
Stock options exercised

325

2,356

Net cash provided by financing activities

361,235

188,497

INCREASES (DECREASES) IN CASH AND CASH EQUIVALENTS

118,111

(11,865
)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD

220,155

202,742

CASH AND CASH EQUIVALENTS, END OF PERIOD
$
338,266

$
190,877


	THREE MONTHS ENDED MARCH 31,
	2021		2020

	(Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	18,868	$	14,868
Proceeds from sales of loans held for sale		85,380		33,914
Originations of loans held for sale		(94,811)		(38,745)
Items not requiring (providing) cash:
Depreciation		2,411		2,484
Amortization		510		412
Compensation expense for stock option grants		298		292
Provision for credit losses on loans		300		3,871
Provision (credit) for unfunded commitments		(674)		—
Net gains on loan sales		(2,688)		(590)
Net (gains) losses on sale of premises and equipment		6		(28)
Net losses on sale/write-down of other real estate owned and repossessions		36		67
Accretion of deferred income, premiums, discounts and other		(2,354)		(1,953)
Loss (gain) on derivative interest rate products		(474)		407
Deferred income taxes		970		(11,049)
Changes in:
Interest receivable		(234)		(282)
Prepaid expenses and other assets		13,662		1,125
Accrued expenses and other liabilities		312		564
Income taxes refundable/payable		3,014		12,332
Net cash provided by operating activities		24,532		17,689

CASH FLOWS FROM INVESTING ACTIVITIES
Net change in loans		14,623		(45,415)
Purchase of loans		(12,078)		(587)
Purchase of premises and equipment		(1,164)		(2,569)
Proceeds from sale of premises and equipment		10		100
Proceeds from sale of other real estate owned and repossessions		439		1,328
Capitalized costs on other real estate owned		—		(126)
Proceeds from termination of interest rate derivative		—		45,864
Proceeds from maturities and calls of available-for-sale securities		5,250		7,850
Principal reductions on mortgage-backed securities		14,786		5,908
Purchase of available-for-sale securities		(80,904)		(20,263)
Redemption of Federal Home Loan Bank stock and change in other interest-earning assets		3,151		3,577
Net cash used in investing activities		(55,887)		(4,333)

CASH FLOWS FROM FINANCING ACTIVITIES
Net increase (decrease) in certificates of deposit		(139,165)		156,626
Net increase in checking and savings deposits		249,198		62,193
Net decrease in short-term borrowings		(22,390)		(186,528)
Advances from borrowers for taxes and insurance		373		1,711
Dividends paid		(4,676)		(19,114)
Purchase of the Company’s common stock		(3,780)		(8,148)
Stock options exercised		622		243
Net cash provided by financing activities		80,182		6,983

INCREASES IN CASH AND CASH EQUIVALENTS		48,827		20,339
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD		563,729		220,155
CASH AND CASH EQUIVALENTS, END OF PERIOD	$	612,556	$	240,494

See Notes to Consolidated Financial Statements

GREAT SOUTHERN BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1: BASIS OF PRESENTATION

The accompanying unaudited interim consolidated financial statements of Great Southern Bancorp, Inc. (the ~~"Company"~~“Company” or ~~"Great Southern"~~“Great Southern”) have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. The financial statements presented herein reflect all adjustments which are, in the opinion of management, necessary to fairly present the financial condition, results of operations, changes in stockholders’ equity and cash flows of the Company as of the dates and for the periods presented. Those adjustments consist only of normal recurring adjustments. Operating results for the three ~~and nine~~ months ended ~~September 30, 2020~~March 31, 2021 are not necessarily indicative of the results that may be expected for the full year. The consolidated statement of financial condition of the Company as of December 31, ~~2019,~~2020, has been derived from the audited consolidated statement of financial condition of the Company as of that date. Certain prior period amounts have been reclassified to conform to the current period presentation. These reclassifications had no effect on net income.

Certain information and note disclosures normally included in the ~~Company's~~Company’s annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the ~~Company's~~ Company’s Annual Report on Form 10-K for the year ended December 31, ~~2019~~2020 filed with the Securities and Exchange ~~Commission.~~Commission (the “SEC”).

NOTE 2: NATURE OF OPERATIONS AND OPERATING SEGMENTS

The Company operates as a one-bank holding company. The Company’s business primarily consists of the operations of Great Southern Bank (the “Bank”), which provides a full range of financial services to customers primarily located in Missouri, Iowa, Kansas, Minnesota, Nebraska and Arkansas. The Bank also originates commercial loans from lending offices in Atlanta, Ga., Chicago, Ill., Dallas, Texas, Denver, Colo., Omaha, Neb. and Tulsa, Okla. The Company and the Bank are subject to regulation by certain federal and state agencies and undergo periodic examinations by those regulatory agencies.

The Company’s banking operation is its only reportable segment. The banking operation is principally engaged in the business of originating residential and commercial real estate loans, construction loans, commercial business loans and consumer loans and funding these loans by attracting deposits from the general public, accepting brokered deposits and borrowing from the Federal Home Loan Bank and others. The operating results of this segment are regularly reviewed by management to make decisions about resource allocations and to assess performance. Selected information is not presented separately for the Company’s reportable segment, as there is no material difference between that information and the corresponding information in the consolidated financial statements.

NOTE 3: RECENT ACCOUNTING PRONOUNCEMENTS

In June 2016, the ~~FASB~~Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (ASU) No. 2016-13, Financial Instruments – Credit Losses (Topic 326). The Update amends guidance on reporting credit losses for assets held at amortized cost basis and available for sale debt securities. For assets held at amortized cost basis, Topic 326 eliminates the probable initial recognition threshold in current GAAP and, instead, requires an entity to reflect its current estimate of all expected credit losses. ~~This~~The Update affects entities holding financial assets and net ~~investment~~investments in leases that are not accounted for at fair value through net income. The ~~amendments affect~~Update affects loans, debt securities, trade receivables, net investments in leases, off balance sheet credit exposures, reinsurance receivables, and any other financial assets not excluded from the scope that have the contractual right to receive cash. The Update was set to be effective for the Company on January 1, 2020. During March 2020, pursuant to the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) and guidance from the ~~Securities~~SEC and ~~Exchange Commission (the “SEC”) and the Financial~~

~~Accounting Standards Board (the “FASB”),~~FASB, we elected to delay adoption of the new accounting standard ~~related~~under the Update that is referred to ~~accounting for~~as the current expected credit ~~losses~~loss (“CECL”)~~. Our third quarter~~ methodology. In December 2020, additional legislation was enacted that amended certain provisions of the CARES Act. One of the provisions that was affected by this new legislation allowed for the election to further delay the adoption of the CECL accounting standard to January 1, 2022. An adoption date of January 1, 2021, was also an acceptable option and ~~year-to-date~~we elected January 1, 2021 as our adoption date for the CECL standard. As a result, our 2020 financial statements ~~are~~were prepared under the existing incurred loss methodology standard for accounting for loan losses.

The adoption of the CECL model during the ~~fourth~~first quarter of ~~2020 will require~~2021 required us to recognize a one-time cumulative adjustment to our allowance for ~~loan~~credit losses and a liability for potential losses related to the unfunded portion of our loans and commitments in order to fully transition from the incurred loss model to the CECL model. Upon initial adoption, we ~~expect to increase~~increased the balance of our allowance for credit losses ~~in a range of $11 million~~related to ~~$14~~outstanding loans by $11.6 million and ~~create~~created a liability for potential losses related to the unfunded portion of our loans and commitments ~~in a range~~ of ~~$7 million to $10~~$8.7 million. The after-tax effect of ~~this is expected to result in a decrease in~~these adjustments decreased our retained earnings ~~of $14 million to $18~~by $14.2 million. Further, we have analyzed the impact on our financial statements at and for the nine months ended September 30, 2020 as if we had adopted the CECL accounting standard on January 1, 2020. In addition to the impact from the initial adoption above, under CECL we would expect to further increase the balance of our allowance for credit losses in a range of $-0- to $3 million through a corresponding increase in provision for credit losses during the nine months ended September 30, 2020. This is in addition to the $14.4 million of provision expense already recorded under the incurred loss method during the nine months ended September 30, 2020. The liability for potential losses related to the unfunded portion of our loans and commitments would be expected to have no material change during the nine months ended September 30, 2020. These estimates are subject to change as material assumptions are refined and model validations are completed.

In ~~January 2017,~~March 2020, the FASB issued ASU ~~No. 2017-04, Intangibles: Goodwill~~2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. ASU 2020-04 provides relief for companies preparing for discontinuation of interest rates such as the London Interbank Offered Rate (“LIBOR”). LIBOR is a benchmark interest rate referenced in a variety of agreements that are used by numerous entities. After 2021, certain LIBOR rates may no longer be published. As a result, LIBOR could be discontinued as a reference rate. Other interest rates used globally could also be discontinued for similar reasons. ASU 2020-04 provides optional expedients and ~~Other: Simplifying~~exceptions to contracts, hedging relationships and other transactions affected by reference rate reform. The main provisions for contract modifications include optional relief by allowing the ~~Test~~modification as a continuation of the existing contract without additional analysis and other optional expedients regarding embedded features. Optional expedients for ~~Goodwill Impairment (Topic 350). To simplify~~hedge accounting permits changes to critical terms of hedging relationships and to the ~~subsequent measurement of goodwill, the amendments eliminate Step 2 from the goodwill impairment test. The annual, or interim, goodwill impairment test should be performed by comparing the~~designated benchmark interest rate in a fair value ~~of a reporting unit with its carrying amount~~hedge and ~~an impairment charge should~~also provides relief for assessing hedge effectiveness for cash flow hedges. Companies are able to apply ASU 2020-04 immediately; however, the guidance will only be ~~recognized for the amount by which the carrying amount exceeds the reporting unit’s fair value. An entity still has the option to perform the qualitative assessment~~available for a ~~reporting unit~~limited time (generally through December 31, 2022). The application of ASU 2020-04 has not had, and is not expected to determine if the qualitative impairment test is necessary. The nature of and reason for the change in accounting principle should be disclosed upon transition. The amendments in this update are required for annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2019. The impact of adopting this new guidance during the quarter ended March 31, 2020 did not have a material impact on the Company’s consolidated financial statements. At September 30, 2020, the Company performed its annual review of goodwill and intangibles, including consideration of the current circumstances brought about by the COVID-19 pandemic and its effect on the valuation of the Company and other bank holding companies. The Company concluded that no impairment of its goodwill and intangible assets had occurred at September 30, 2020.

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820) - Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement. ASU 2018-13 modifies the disclosure requirements on fair value measurements in Topic 820. The amendments in this update remove disclosures that no longer are considered cost beneficial, modify/clarify the specific requirements of certain disclosures, and add disclosure requirements identified as relevant. ASU 2018-13 is effective for periods beginning after December 15, 2019. The impact of adopting this new guidance during the quarter ended March 31, 2020 did not have, a material impact on the Company’s consolidated financial statements.

In January 2021, the FASB issued ASU 2021-01, Reference Rate Reform (Topic 848): Scope. ASU 2021-01 clarifies that certain optional expedients and exceptions in ASC 848 for contract modifications and hedge accounting apply to derivatives that are affected by the discounting transition. ASU 2021-01 also amends the expedients and exceptions in ASC 848 to capture the incremental consequences of the scope clarification and to tailor the existing guidance to derivative instruments affected by the discounting transition. ASU 2021-01 was effective upon issuance and generally can be applied through December 31, 2022. ASU 2021-01 has not had, and is not expected to have, a material impact on the Company’s consolidated financial statements.

NOTE 4: EARNINGS PER SHARE


					Three Months Ended March 31,
					2021		2020
	Three Months Ended September 30,
	2020		2019
	(In Thousands, Except Per Share Data)

					(In Thousands, Except Per Share Data)
Basic:
Average common shares outstanding		14,053		14,210		13,716		14,221
Net income and net income available to common stockholders	$	13,454	$	19,732	$	18,868	$	14,868
Per common share amount	$	0.96	$	1.39	$	1.38	$	1.05


Diluted:
Average common shares outstanding		14,053		14,210		13,716		14,221
Net effect of dilutive stock options – based on the treasury
stock method using average market price		32		107
Net effect of dilutive stock options – based on the treasury stock method using average market price						112		78
Diluted common shares		14,085		14,317		13,828		14,299
Net income and net income available to common stockholders	$	13,454	$	19,732	$	18,868	$	14,868
Per common share amount	$	0.96	$	1.38	$	1.36	$	1.04

Nine Months Ended September 30,

2020

2019

(In Thousands, Except Per Share Data)

Basic:

Average common shares outstanding

14,119

14,187
Net income and net income available to common stockholders
$
41,525

$
55,720
Per common share amount
$
2.94

$
3.93

Diluted:

Average common shares outstanding

14,119

14,187
Net effect of dilutive stock options – based on the treasury

stock method using average market price

46

110
Diluted common shares

14,165

14,297
Net income and net income available to common stockholders
$
41,525

$
55,720
Per common share amount
$
2.93

$
3.90

Options outstanding at ~~September 30,~~March 31, 2021 and 2020, ~~and 2019,~~ to purchase ~~654,369~~352,488 and ~~328,275~~568,551 shares of common stock, respectively, were not included in the computation of diluted earnings per common share for each of the three month periods ~~then ended~~ because the exercise prices of such options were greater than the average market prices of the common stock for the three months ended ~~September 30,~~March 31, 2021 and 2020, and 2019, respectively. Options outstanding at September 30, 2020 and 2019, to purchase 650,869 and 318,275 shares of common stock, respectively, were not included in the computation of diluted earnings per common share for the nine month periods then ended because the exercise prices of such options were greater than the average market prices of the common stock for the nine months ended September 30, 2020 and 2019, respectively.

NOTE 5: INVESTMENT SECURITIES

The amortized cost and fair values of securities classified as available-for-sale were as follows:

										��
									March 31, 2021
											Gross		Gross
									Amortized		Unrealized		Unrealized		Fair
									Cost		Gains		Losses		Value
		September 30, 2020
				Gross		Gross
		Amortized		Unrealized		Unrealized		Fair
		Cost		Gains		Losses		Value
		(In Thousands)

									(In Thousands)
AVAILABLE-FOR-SALE SECURITIES:
Agency mortgage-backed securities	$	152,068	$	19,402	$	12	$	171,458	$	159,967	$	11,283	$	1,482	$	169,768
Agency collateralized mortgage obligations		176,077		9,273		259		185,091		226,494		4,182		3,594		227,082
States and political subdivisions		65,821		1,959		97		67,683		39,833		1,546		149		41,230
Small Business Administration securities		20,677		1,031		-		21,708		19,272		316		—		19,588
	$	414,643	$	31,665	$	368	$	445,940
									$	445,566	$	17,327	$	5,225	$	457,668


									December 31, 2020
											Gross		Gross
									Amortized		Unrealized		Unrealized		Fair
									Cost		Gains		Losses		Value
		December 31, 2019
				Gross		Gross
		Amortized		Unrealized		Unrealized		Fair
		Cost		Gains		Losses		Value
		(In Thousands)

									(In Thousands)
AVAILABLE-FOR-SALE SECURITIES:
Agency mortgage-backed securities	$	156,591	$	8,716	$	265	$	165,042	$	151,106	$	19,665	$	831	$	169,940
Agency collateralized mortgage obligations		149,980		2,891		921		151,950		168,472		8,524		375		176,621
States and political subdivisions		33,757		1,368		-		35,125		45,196		2,135		6		47,325
Small Business Administration securities		22,132		-		74		22,058		20,033		1,014		—		21,047
	$	362,460	$	12,975	$	1,260	$	374,175

									$	384,807	$	31,338	$	1,212	$	414,933

The amortized cost and fair value of available-for-sale securities at ~~September 30, 2020,~~March 31, 2021, by contractual maturity, are shown below. Expected maturities will differ from contractual maturities because issuers may have the right to call or prepay obligations with or without call or prepayment penalties.


					Amortized		Fair
					Cost		Value
		Amortized		Fair
		Cost		Value
		(In Thousands)

					(In Thousands)
One year or less	$	-	$	-	$	—	$	—
After one through five years		-		-		—		—
After five through ten years		10,388		11,064		9,929		10,471
After ten years		55,433		56,619		29,904		30,759
Securities not due on a single maturity date		348,822		378,257		405,733		416,438

	$	414,643	$	445,940
					$	445,566	$	457,668

There were no0 securities classified as held to maturity at ~~September 30, 2020~~March 31, 2021 or December 31, ~~2019.~~

2020.

Certain investments in debt securities are reported in the financial statements at an amount less than their historical cost. Total fair value of these investments at ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019,~~2020, was approximately ~~$33.9~~$134.5 million and ~~$116.2~~$24.2 million, respectively, which is approximately ~~7.6%~~29.4% and ~~31.1%~~5.8% of the Company’s available-for-sale investment portfolio, respectively.

Based on an evaluation of available evidence, including recent changes in market interest rates, credit rating information and information obtained from regulatory filings, management believes any declines in fair value for these debt securities are temporary.

The following table shows the Company’s gross unrealized losses and fair value, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position at ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019:~~2020:

		September 30, 2020
		Less than 12 Months					12 Months or More				Total
		Fair		Unrealized			Fair		Unrealized		Fair		Unrealized

														March 31, 2021
														Less than 12 Months				12 Months or More				Total
														Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
Description of Securities		Value		Losses			Value		Losses		Value		Losses	Value		Losses		Value		Losses		Value		Losses
		(In Thousands)

														(In Thousands)
Agency mortgage-backed securities	$	11,140	$	(12	)	$	-	$	-	$	11,140	$	(12)	$	19,668	$	(1,482)	$	—	$	—	$	19,668	$	(1,482)
Agency collateralized mortgage obligations		12,849		(259	)		-		-		12,849		(259)		105,043		(3,594)		—		—		105,043		(3,594)
States and political subdivisions		9,929		(97	)		-		-		9,929		(97)

	$	33,918	$	(368	)	$	-	$	-	$	33,918	$	(368)
States and political subdivisions securities															9,773		(149)		—		—		9,773		(149)

														$	134,484	$	(5,225)	$	—	$	—	$	134,484	$	(5,225)

		December 31, 2019
		Less than 12 Months				12 Months or More				Total
		Fair		Unrealized		Fair		Unrealized		Fair		Unrealized

													December 31, 2020
													Less than 12 Months				12 Months or More				Total
													Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
Description of Securities		Value		Losses		Value		Losses		Value		Losses	Value		Losses		Value		Losses		Value		Losses
		(In Thousands)

													(In Thousands)
Agency mortgage-backed securities	$	-	$	-	$	24,762	$	(265)	$	24,762	$	(265)	$	10,279	$	(831)	$	—	$	—	$	10,279	$	(831)
Agency collateralized mortgage obligations		69,372		(921)		-		-		69,372		(921)		12,727		(375)		—		—		12,727		(375)
Small Business Administration securities		22,058		(74)		-		-		22,058		(74)		—		—		—		—		—		—

	$	91,430	$	(995)	$	24,762	$	(265)	$	116,192	$	(1,260)
States and political subdivisions securities														1,164		(6)		—		—		1,164		(6)

													$	24,170	$	(1,212)	$	—	$	—	$	24,170	$	(1,212)

There were no0 sales of available-for-sale securities during the three months ended ~~September 30,~~March 31, 2021 or March 31, 2020. Gross gains of $78,000 resulting from sales of available-for-sale securities were realized during the nine months ended September 30, 2020. There were no sales of available-for-sale securities during the three months ended September 30, 2020. Gross gains of $226,000 and gross losses of $216,000 resulting from sales of available-for-sale securities were realized during the nine months ended September 30, 2019. Gains and losses on sales of securities are determined on the specific-identification method.

~~Other-than-temporary Impairment.~~ ~~Upon acquisition of a security,~~Allowance for Credit Losses Beginning January 1, 2021, the Company decides whether it is within the scope of the accounting guidance for beneficial interests in securitized financial assets or will be evaluated for impairment under the accounting guidance for investments in debt and equity securities. The Company does not have, and does not currently expect to have,evaluates all securities within the scope of the accounting guidance for beneficial interests. For securities where the security is not a beneficial interest in securitized financial assets, the Company uses the debt and equity securities impairment model.

The Company periodically evaluates each investment security in an unrealized loss position to determine whether an other-than-temporary impairment has occurred. The Company considers the length of time a security has been in an unrealized loss position, the relative amount of the unrealized loss compared to the carrying value of the security, the type of security and other factors. If certain criteria are met, the Company performs additional review and evaluation using observable market values or various inputs in economic modelsquarterly to determine if ~~an unrealized~~any securities in a loss ~~is other-than-temporary. The Company uses quoted market prices~~position require a provision for ~~marketable equity securities and uses broker pricing quotes based~~credit losses in accordance with ASC 326, Measurement of Credit Losses on ~~observable inputs for equity investments that are not traded on a stock exchange. For non-agency~~Financial Instruments. All of the mortgage-backed, collateralized mortgage, ~~obligations, to determine if the unrealized loss is other than temporary,~~and SBA securities held by the Company ~~projects total estimated defaults~~are issued by U.S. government-sponsored entities and agencies. These securities are either explicitly or implicitly guaranteed by the U.S. government, are highly rated by major rating agencies and have a long history of no credit losses. Likewise, the Company has not experienced historical losses on these types of securities. Accordingly, 0 allowance for credit losses has been recorded for these securities.

Regarding securities issued by state and political subdivisions, management considers the following when evaluating these securities: (i) current issuer bond ratings, (ii) historical loss rates for given bond ratings, (iii) whether issuers continue to make timely principal and interest payments under the contractual terms of the ~~underlying assets (mortgages)~~securities, (iv) updated financial information of the issuer, (v) internal forecasts and multiplies that calculated amount by an estimate of realizable value upon sale in the marketplace (severity) in order to determine the projected collateral loss. The Company also evaluates any current(vi) whether such securities provide insurance or other credit enhancement ~~underlying these~~or are pre-refunded by the issuers. These securities ~~to determine the impact on cash flows. If~~are highly rated by major rating agencies and have a long history of no credit losses. Likewise, the Company ~~determines that a given security position will be subject to a write-down or loss, the Company records the expected credit loss as a charge to earnings.~~

~~During the three and nine months ended September 30, 2020,~~has not experienced historical losses on these types of securities. Accordingly, no ~~securities were determined to have impairment that had become other-than-temporary.~~

~~Credit Losses Recognized on Investments.~~~~During the three and nine months ended September 30, 2020 and 2019, respectively,there were no debt securities that had experienced fair value deterioration due to~~allowance for credit losses ~~as well as due to other market factors, but are not otherwise other-than-temporarily impaired.~~has been recorded for these securities.

Amounts Reclassified Out of Accumulated Other Comprehensive Income.~~Amounts~~There were 0 amounts reclassified from accumulated other comprehensive income ~~and the affected line items in the statements of income~~ during the three ~~and nine~~ months ended ~~September 30, 2020~~March 31, 2021 and ~~2019, are shown below.~~ 2020.

Amounts Reclassified from
Accumulated Other

Comprehensive Income
Three Months Ended
September 30,

Affected Line Item in the

2020

2019

Statements of Income

(In Thousands)

Net realized gains on sales of
Unrealized gains on available-for-
   sale securities
$         -

$          -

available-for-sale securities

(Total reclassified amount before tax)
Income Taxes
         -

          -

Provision for income taxes
Total reclassifications out of accumulated

other comprehensive income
$         -

$          -

Amounts Reclassified from
Accumulated Other

Comprehensive Income
Nine Months Ended
September 30,

Affected Line Item in the

2020

2019

Statements of Income

(In Thousands)

Net realized gains on sales of
Unrealized gains on available-for-
   sale securities
$          78

$        10

available-for-sale securities
��

(Total reclassified amount before tax)
Income Taxes
        (18)

        (2)

Provision for income taxes
Total reclassifications out of accumulated

other comprehensive income
$          60

$          8

NOTE 6: LOANS AND ALLOWANCE FOR ~~LOAN~~CREDIT LOSSES

The Company adopted ASU 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, effective January 1, 2021. The guidance replaces the incurred loss methodology with an expected loss methodology that is referred to as the CECL methodology. The measurement of expected credit losses under the CECL methodology is applicable to financial assets measured at amortized cost, including loan receivables. It also applies to off-balance sheet credit exposures not accounted for as insurance, including loan commitments, standby letters of credits, financial guarantees, and other similar instruments. The Company adopted ASC 326 using the modified retrospective method for loans and off-balance sheet credit exposures. The Company recorded a one-time cumulative-effect adjustment to the allowance for credit losses of $11.6 million.

This adjustment brought the balance of the allowance for credit losses to $67.3 million as of January 1, 2021. In addition, the Company recorded an $8.7 million liability for unfunded commitments as of January 1, 2021. The after-tax effect decreased retained earnings by $14.2 million. The adjustment was based upon the Company’s analysis of current conditions, assumptions and economic forecasts at January 1, 2021.

The Company adopted ASC 326 using the prospective transition approach for financial assets purchased with credit deterioration (PCD) that were previously classified as purchased credit impaired (PCI) and accounted for under ASC 310-30. In accordance with the standard, management did not reassess whether PCI assets met the criteria of PCD assets as of the date of adoption. On January 1, 2021, the amortized cost basis of the PCD assets were adjusted to reflect the addition of $1.9 million of the allowance for credit losses.

Results for reporting periods after December 31, 2020 are presented under ASC 326 while prior period amounts continue to be reported in accordance with previously applicable GAAP. Under the incurred loss model, the Company delayed recognition of losses until it was probable that a loss was incurred. The allowance for loan losses was established as losses were estimated to have occurred through a provision for loan losses charged to earnings. Loan losses were charged against the allowance when management believed the uncollectability of a loan balance was confirmed. The allowance for loan losses was evaluated on a regular basis by management and was based upon management’s periodic review of the collectability of the loans in light of historical experience, the nature and volume of the loan portfolio, adverse situations that may affect the borrower’s ability to repay, estimated value of any underlying collateral and prevailing economic conditions. The allowance consisted of allocated and general components. The allocated component relates to loans that are classified as impaired. For loans classified as impaired, an allowance is established when the discounted cash flows (or collateral value or observable market price) of the impaired loan is lower than the carrying value of that loan. The general component covers non-classified loans and is based on historical charge-off experience and expected loss given default derived from the Company’s internal risk rating process. Results for reporting periods after December 31, 2020 include loans acquired and accounted for under ASC 310-30 net of discount within the loan classes, while for reporting periods prior to January 1, 2021 the loans acquired and accounted for under ASC 310-30 are separate.

Beginning on January 1, 2021, the allowance for credit losses is measured using an average historical loss model which incorporates relevant information about past events (including historical credit loss experience on loans with similar risk characteristics), current conditions, and reasonable and supportable forecasts that affect the collectability of the remaining cash flows over the contractual term of the loans. The allowance for credit losses is measured on a collective (pool) basis. Loans are aggregated into pools based on similar risk characteristics including borrower type, collateral and repayment types and expected credit loss patterns. Loans that do not share similar risk characteristics, primarily classified and/or TDR loans with a balance greater than or equal to $100,000, are evaluated on an individual basis.

For loans evaluated for credit losses on a collective basis, average historical loss rates are calculated for each pool using the Company’s historical net charge-offs (combined charge-offs and recoveries by observable historical reporting period) and outstanding loan balances during a lookback period. Lookback periods can be different based on the individual pool and represent management’s credit expectations for the pool of loans over the remaining contractual life. In certain loan pools, if the Company’s own historical loss rate is not reflective of the loss expectations, the historical loss rate is augmented by industry and peer data. The calculated average net charge-off rate is then adjusted for current conditions and reasonable and supportable forecasts. These adjustments increase or decrease the average historical loss rate to reflect expectations of future losses given economic forecasts of key macroeconomic variables including, but not limited to, unemployment rate, GDP, disposable income and market volatility. The adjustments are based on results from various regression models projecting the impact of the macroeconomic variables to loss rates. The forecast is used for a reasonable and supportable period before reverting to historical averages using a straight-line method. The forecast-adjusted loss rate is applied to the amortized cost of loans over the remaining contractual lives, adjusted for expected prepayments. The contractual term excludes expected extensions, renewals and modifications unless there is a reasonable expectation that a troubled debt restructuring will be executed. Additionally, the allowance for credit losses considers other qualitative factors not included in historical loss rates or macroeconomic forecasts such as changes in portfolio composition, underwriting practices, or significant unique events or conditions.

ASU 2016-13 requires an allowance for off balance sheet credit exposures; unfunded lines of credit, undisbursed portions of loans, written residential and commercial commitments, and letters of credit. To determine the amount needed for allowance purposes, a utilization rate is determined either by the model or internally for each pool. Our loss model calculates the reserve on unfunded commitments based upon the utilization rate multiplied by the average loss rate factors in each pool with unfunded and committed balances. The liability for unfunded lending commitments utilizes the same model as the allowance for credit losses on loans; however, the liability for unfunded lending commitments incorporates assumptions for the portion of unfunded commitments that are expected to be funded.

Classes of loans at ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019~~2020 were as follows:


							March 31,			December 31,
							2021			2020
		September 30,			December 31,
		2020			2019
		(In Thousands)

							(In Thousands)
One- to four-family residential construction	$	38,503		$	33,963		$	48,161		$	42,793
Subdivision construction		10,466			16,088			7,297			30,894
Land development		40,224			40,431			54,590			54,010
Commercial construction		1,206,342			1,322,861			1,206,687			1,212,837
Owner occupied one- to four-family residential		478,113			387,016			510,343			470,436
Non-owner occupied one- to four-family residential		117,699			120,343			130,609			114,569
Commercial real estate		1,536,443			1,494,172			1,588,771			1,553,677
Other residential		1,018,359			866,006			1,055,395			1,021,145
Commercial business		439,199			313,209			372,533			370,898
Industrial revenue bonds		14,165			13,189			14,559			14,003
Consumer auto		99,284			151,854			73,651			86,173
Consumer other		41,333			46,720			39,724			40,762
Home equity lines of credit		114,357			118,988			113,794			114,689
Loans acquired and accounted for under ASC 310-30, net of discounts		106,128			127,206
		5,260,615			5,052,046
Loans acquired and accounted for under ASC 310-30, net of discounts (1)								—			98,643
								5,216,114			5,225,529
Undisbursed portion of loans in process		(782,865	)		(850,666	)		(851,768)			(863,722)
Allowance for loan losses		(54,238	)		(40,294	)
Allowance for credit losses								(67,702)			(55,743)
Deferred loan fees and gains, net		(9,748	)		(7,104	)		(10,907)			(9,260)
	$	4,413,764		$	4,153,982

							$	4,285,737		$	4,296,804

Weighted average interest rate		4.28	%		4.97	%		4.30	%		4.29	%

(1)

Loans acquired and accounted for under ASC 310-30 of $91.9 million have been included in the totals by loan class as of March 31, 2021. At the date of CECL adoption, the Company did not reassess whether purchased credit impaired loans met the criteria of purchased credit deteriorated loans.

~~Classes~~The following tables present the classes of loans by ~~aging were~~aging. Loans acquired and accounted for under ASC 310-30 of $91.9 million have been included in the totals by loan class as ~~follows:~~of March 31, 2021.


	March 31, 2021
													Total Loans
					Over 90						Total		> 90 Days Past
	30-59 Days		60-89 Days		Days		Total Past				Loans		Due and
	Past Due		Past Due		Past Due		Due		Current		Receivable		Still Accruing

	(In Thousands)
One- to four-family residential construction	$	249	$	—	$	—	$	249	$	47,912	$	48,161	$	—
Subdivision construction		—		—		—		—		7,297		7,297		—
Land development		14		—		622		636		53,954		54,590		—
Commercial construction		—		—		—		—		1,206,687		1,206,687		—
Owner occupied one- to four-family residential		2,017		252		4,111		6,380		503,963		510,343		—
Non-owner occupied one- to four-family residential		—		—		112		112		130,497		130,609		—
Commercial real estate		302		—		3,394		3,696		1,585,075		1,588,771		—
Other residential		—		—		185		185		1,055,210		1,055,395		—
Commercial business		83		—		106		189		372,344		372,533		—
Industrial revenue bonds		944		—		—		944		13,615		14,559		—
Consumer auto		145		30		106		281		73,370		73,651		—
Consumer other		117		25		100		242		39,482		39,724		—
Home equity lines of credit		40		63		810		913		112,881		113,794		—

		3,911		370		9,546		13,827		5,202,287		5,216,114		—
Less: FDIC-acquired loans		2,133		109		3,576		5,818		86,116		91,934		—
Total	$	1,778	$	261	$	5,970	$	8,009	$	5,116,171	$	5,124,180	$	—

September 30, 2020

Total Loans

Total

> 90 Days

30-59 Days

60-89 Days

90+ Days

Total

Loans

Past Due and

Past Due

Past Due

Past Due

Past Due

Current

Receivable

Still Accruing

(In Thousands)
One- to four-family

residential construction
$
79

$
-

$
-

$
79

$
38,424

$
38,503

$
-
Subdivision construction

-

-

-

-

10,466

10,466

-
Land development

236

39

-

275

39,949

40,224

-
Commercial construction

-

-

-

-

1,206,342

1,206,342

-
Owner occupied one- to four-

family residential

336

195

1,922

2,453

475,660

478,113

-
Non-owner occupied one-

to four- family residential

-

-

238

238

117,461

117,699

-
Commercial real estate

100

-

701

801

1,535,642

1,536,443

-
Other residential

-

-

-

-

1,018,359

1,018,359

-
Commercial business

-

-

140

140

439,059

439,199

-
Industrial revenue bonds

-

-

-

-

14,165

14,165

-
Consumer auto

384

45

267

696

98,588

99,284

-
Consumer other

177

6

112

295

41,038

41,333

-
Home equity lines of credit

109

129

457

695

113,662

114,357

-
Loans acquired and accounted

for under ASC 310-30,

net of discounts

331

348

3,966

4,645

101,483

106,128

-

1,752

762

7,803

10,317

5,250,298

5,260,615

-
Less loans acquired an accountedd
for under ASC 310-30,

net of discounts

331

348

3,966

4,645

101,483

106,128

-

Total
$
1,421

$
414

$
3,837

$
5,672

$
5,148,815

$
5,154,487

$
-


	December 31, 2020
													Total Loans
					Over 90						Total		> 90 Days Past
	30-59 Days		60-89 Days		Days		Total Past				Loans		Due and
	Past Due		Past Due		Past Due		Due		Current		Receivable		Still Accruing

	(In Thousands)
One- to four-family residential construction	$	1,365	$	—	$	—	$	1,365	$	41,428	$	42,793	$	—
Subdivision construction		—		—		—		—		30,894		30,894		—
Land development		20		—		—		20		53,990		54,010		—
Commercial construction		—		—		—		—		1,212,837		1,212,837		—
Owner occupied one- to four-family residential		1,379		113		1,502		2,994		467,442		470,436		—
Non-owner occupied one- to four-family residential		—		—		69		69		114,500		114,569		—
Commercial real estate		—		79		587		666		1,553,011		1,553,677		—
Other residential		—		—		—		—		1,021,145		1,021,145		—
Commercial business		—		—		114		114		370,784		370,898		—
Industrial revenue bonds		—		—		—		—		14,003		14,003		—
Consumer auto		364		119		169		652		85,521		86,173		—
Consumer other		443		7		94		544		40,218		40,762		—
Home equity lines of credit		153		111		508		772		113,917		114,689		—
Loans acquired and accounted for under ASC 310-30, net of discounts		1,662		641		3,843		6,146		92,497		98,643		—

		5,386		1,070		6,886		13,342		5,212,187		5,225,529		—
Less: Loans acquired and accounted for under ASC 310-30, net of discounts		1,662		641		3,843		6,146		92,497		98,643		—

Total	$	3,724	$	429	$	3,043	$	7,196	$	5,119,690	$	5,126,886	$	—

Loans are placed on nonaccrual status at 90 days past due and interest is considered a loss unless the loan is well secured and in the process of collection. Payments received on nonaccrual loans are applied to principal until the loans are returned to accrual status. Loans are returned to accrual status when all payments contractually due are brought current, payment performance is sustained for a period of time, generally six months, and future payments are reasonably assured. With the exception of consumer loans, charge-offs on loans are recorded when available information indicates a loan is not fully collectible and the loss is reasonably quantifiable. Consumer loans are charged-off at specified delinquency dates consistent with regulatory guidelines.

December 31, 2019

Total Loans

Total

> 90 Days

30-59 Days

60-89 Days

90+ Days

Total

Loans

Past Due and

Past Due

Past Due

Past Due

Past Due

Current

Receivable

Still Accruing

(In Thousands)
One- to four-family

residential construction
$
-

$
-

$
-

$
-

$
33,963

$
33,963

$
-
Subdivision construction

-

-

-

-

16,088

16,088

-
Land development

-

27

-

27

40,404

40,431

-
Commercial construction

15,085

-

-

15,085

1,307,776

1,322,861

-
Owner occupied one- to four-

family residential

1,453

1,631

1,198

4,282

382,734

387,016

-
Non-owner occupied one-

to four- family residential

152

-

181

333

120,010

120,343

-
Commercial real estate

549

119

632

1,300

1,492,872

1,494,172

-
Other residential

376

-

-

376

865,630

866,006

-
Commercial business

60

-

1,235

1,295

311,914

313,209

-
Industrial revenue bonds

-

-

-

-

13,189

13,189

-
Consumer auto

1,101

259

558

1,918

149,936

151,854

-
Consumer other

278

233

198

709

46,011

46,720

-
Home equity lines of credit

296

-

517

813

118,175

118,988

-
Loans acquired and accounted
for under ASC 310-30,

net of discounts

2,177

709

6,191

9,077

118,129

127,206

-

21,527

2,978

10,710

35,215

5,016,831

5,052,046

-
Less loans acquired and
accounted for under

ASC 310-30, net of discounts

2,177

709

6,191

9,077

118,129

127,206

-

Total
$
19,350

$
2,269

$
4,519

$
26,138

$
4,898,702

$
4,924,840

$
-

Non-accruing loans ~~(excluding~~as of December 31, 2020 shown below exclude $3.8 million in loans acquired and accounted for under ASC 310-30, while the non-accruing loans as of March 31, 2021 include $3.6 million in the loans acquired through various FDIC-assisted ~~acquired~~transactions in the loan classes listed.


	March 31,		December 31,
	2021		2020

	(In Thousands)

One- to four-family residential construction	$	—	$	—
Subdivision construction		—		—
Land development		622		—
Commercial construction		—		—
Owner occupied one- to four-family residential		4,111		1,502
Non-owner occupied one- to four-family residential		112		69
Commercial real estate		3,394		587
Other residential		185		—
Commercial business		106		114
Industrial revenue bonds		—		—
Consumer auto		106		169
Consumer other		100		94
Home equity lines of credit		810		508
Total non-accruing loans		9,546
Less: FDIC-acquired loans		3,576

Total non-accruing loans net of FDIC-acquired loans	$	5,970	$	3,043

No interest income was recorded on these loans ~~net~~for the three months ended March 31, 2021 and 2020, respectively.

Nonaccrual loans for which there is no related allowance for credit losses as of ~~discount)~~March 31, 2021 had an amortized cost of $3.5 million. These loans are ~~summarized~~individually assessed and do not hold an allowance due to being adequately collateralized under the collateral-dependent valuation method. A collateral-dependent loan is a financial asset for which the repayment is expected to be provided substantially through the operation or sale of the collateral when the borrower is experiencing financial difficulty based on the Company’s assessment as ~~follows:~~of the reporting date. Collateral-dependent loans are identified by either a classified risk rating or TDR status and a loan balance equal to or greater than $100,000, including, but not limited to, any loan in process of foreclosure or repossession.

The following table presents the activity in the allowance for credit losses by portfolio segment for the three months ended March 31, 2021. On January 1, 2021, the Company adopted the CECL methodology, which added $11.6 million to the total Allowance for Credit Loss, which included $1.9 million remaining discount on loans that were previously accounted for as purchased credit impaired. Under the CECL methodology, the Company recorded a $300,000 provision for credit losses on loans during the three months ended

September 30,

December 31,

2020

2019

(In Thousands)

One- to four-family residential construction
$
-

$
-
Subdivision construction

-

-
Land development

-

-
Commercial construction

-

-
Owner occupied one- to four-family residential

1,922

1,198
Non-owner occupied one- to four-family residential

238

181
Commercial real estate

701

632
Other residential

-

-
Commercial business

140

1,235
Industrial revenue bonds

-

-
Consumer auto

267

558
Consumer other

112

198
Home equity lines of credit

457

517

Total
$
3,837

$
4,519

March 31, 2021, compared to a $3.9 million provision for loan losses in the three months ended March 31, 2020, under the incurred loss method.


	One- to Four-
	Family
	Residential and		Other		Commercial		Commercial		Commercial
	Construction		Residential		Real Estate		Construction		Business		Consumer		Total

	(In Thousands)
Allowance for credit losses
Balance, December 31, 2020	$	4,536	$	9,375	$	33,707	$	3,521	$	2,390	$	2,214	$	55,743
CECL adoption		4,533		5,832		(2,531)		(1,165)		1,499		3,427		11,595
Balance, January 1, 2021		9,069		15,207		31,176		2,356		3,889		5,641		67,338

Provision charged to expense		—		—		300		—		—		—		300
Losses charged off		(6)		—		—		—		—		(649)		(655)
Recoveries		38		92		24		10		47		508		719
Balance, March 31, 2021	$	9,101	$	15,299	$	31,500	$	2,366	$	3,936	$	5,500	$	67,702

The following table presents the activity in the allowance for unfunded commitments by portfolio segment for the three months ended March 31, 2021. On January 1, 2021, the Company adopted the CECL methodology, which created an $8.7 million allowance for unfunded commitments. Under the CECL methodology, the Company recorded a $674,000 benefit for unfunded loan commitments during the three months ended March 31, 2021.


	One- to Four-
	Family
	Residential and		Other		Commercial		Commercial		Commercial
	Construction		Residential		Real Estate		Construction		Business		Consumer		Total

	(In Thousands)
Allowance for unfunded commitments
Balance, December 31, 2020	$	—	$	—	$	—	$	—	$	—	$	—	$	—
CECL adoption		917		5,227		354		910		935		347		8,690
Balance, January 1, 2021		917		5,227		354		910		935		347		8,690

Provision (benefit) charged to expense		40		(412)		103		(400)		21		(25)		(673)
Balance, March 31, 2021	$	957	$	4,815	$	457	$	510	$	956	$	322	$	8,017

The following table presents the activity in the allowance for loan losses by portfolio segment for the three ~~and nine~~ months ended ~~September 30, 2020. Also presented are~~March 31, 2020, prepared using the ~~balance in~~previous GAAP incurred loss method prior to the ~~allowance for loan losses and the recorded investment in loans based on portfolio segment and impairment method as~~adoption of ~~September 30, 2020:~~ASU 2016-13.


	One- to Four-
	Family
	Residential and		Other		Commercial		Commercial		Commercial
	Construction		Residential		Real Estate		Construction		Business		Consumer		Total

	(In Thousands)
Balance January 1, 2020	$	4,339	$	5,153	$	24,334	$	3,076	$	1,355	$	2,037	$	40,294
Provision (benefit) charged to expense		394		879		1,549		(867)		169		1,747		3,871
Losses charged off		(29)		—		—		(1)		(9)		(1,106)		(1,145)
Recoveries		35		114		40		13		64		642		908
Balance March 31, 2020	$	4,739	$	6,146	$	25,923	$	2,221	$	1,579	$	3,320	$	43,928

One- to Four-

Family

Residential and

Other

Commercial

Commercial

Commercial

Construction

Residential

Real Estate

Construction

Business

Consumer

Total

(In Thousands)

Allowance for loan losses

Balance, July 1, 2020
$
4,492

$
9,064

$
28,905

$
2,793

$
1,817

$
2,730

$
49,801

Provision (benefit) charged
    to expense

(127
)

(344
)

3,686

1,222

55

8

4,500

Losses charged off

-

-

-

-

(1
)

(685
)

(686
)
Recoveries

67

11

2

12

35

496

623

Balance, September 30, 2020
$
4,432

$
8,731

$
32,593

$
4,027

$
1,906

$
2,549

$
54,238

Balance, January 1, 2020
$
4,339

$
5,153

$
24,334

$
3,076

$
1,355

$
2,037

$
40,294

Provision (benefit) charged
    to expense

17

3,401

8,217

918

424

1,394

14,371

Losses charged off

(40
)

-

-

(1
)

(10
)

(2,538
)

(2,589
)
Recoveries

116

177

42

34

137

1,656

2,162

Balance, September 30, 2020
$
4,432

$
8,731

$
32,593

$
4,027

$
1,906

$
2,549

$
54,238

Ending balance:

Individually evaluated for

    impairment
$
79

$
-

$
466

$
-

$
15

$
186

$
746

Collectively evaluated for

   impairment
$
4,288

$
8,642

$
31,756

$
3,865

$
1,849

$
2,351

$
52,751

Loans acquired and accounted

    for under ASC310-30
$
65

$
89

$
371

$
162

$
42

$
12

$
741

Loans

Individually evaluated for

   impairment
$
3,603

$
-

$
3,056

$
-

$
197

$
1,909

$
8,765

Collectively evaluated for

    impairment
$
641,178

$
1,018,359

$
1,533,387

$
1,246,566

$
453,167

$
253,065

$
5,145,722

Loans acquired and accounted

    for under ASC310-30
$
61,226

$
6,167

$
26,493

$
2,818

$
2,390

$
7,034

$
106,128

~~The following table presents the activity in the allowance for loan losses by portfolio segment for the three and nine months ended September 30, 2019.~~

The following table presents the balance in the allowance for loan losses and the recorded investment in loans based on portfolio segment and impairment method as of December 31, ~~2019:~~

One- to Four-

Family

Residential and

Other

Commercial

Commercial

Commercial

Construction

Residential

Real Estate

Construction

Business

Consumer

Total

(In Thousands)

Allowance for loan losses

Individually evaluated
   for impairment
$
198

$
-

$
517

$
-

$
13

$
201

$
929
Collectively evaluated
   for impairment
$
3,973

$
5,101

$
23,570

$
2,940

$
1,306

$
1,814

$
38,704
Loans acquired and
   accounted for under
   ASC 310-30
$
168

$
52

$
247

$
136

$
36

$
22

$
661

Loans

Individually evaluated
   for impairment
$
2,960

$
-

$
4,020

$
-

$
1,286

$
2,001

$
10,267
Collectively evaluated
   for impairment
$
554,450

$
866,006

$
1,490,152

$
1,363,292

$
325,112

$
315,561

$
4,914,573
Loans acquired and
   accounted for under
   ASC 310-30
$
74,562

$
5,334

$
29,158

$
3,606

$
3,356

$
11,190

$
127,206

2020, prepared using the previous GAAP incurred loss method prior to the adoption of ASU 2016-13.


	One- to Four-
	Family
	Residential and		Other		Commercial		Commercial		Commercial
	Construction		Residential		Real Estate		Construction		Business		Consumer		Total

	(In Thousands)
Allowance for loan losses
Individually evaluated for impairment	$	90	$	—	$	445	$	—	$	14	$	164	$	713
Collectively evaluated for impairment	$	4,382	$	9,282	$	32,937	$	3,378	$	2,331	$	2,040	$	54,350
Loans acquired and accounted for under ASC 310-30	$	64	$	93	$	325	$	143	$	45	$	10	$	680

Loans
Individually evaluated for impairment	$	3,546	$	—	$	3,438	$	—	$	167	$	1,897	$	9,048
Collectively evaluated for impairment	$	655,146	$	1,021,145	$	1,550,239	$	1,266,847	$	384,734	$	239,727	$	5,117,838
Loans acquired and accounted for under ASC 310-30	$	57,113	$	6,150	$	24,613	$	2,551	$	2,549	$	5,667	$	98,643

The portfolio segments used in the preceding ~~three~~ tables correspond to the loan classes used in all other tables in Note 6 as follows:

·The one- to four-family residential and construction segment includes the one- to four-family residential construction, subdivision construction, owner occupied one- to four-family residential and non-owner occupied one- to four-family residential classes

·
● The one- to four-family residential and construction segment includes the one- to four-family residential construction, subdivision construction, owner occupied one- to four-family residential and non-owner occupied one- to four-family residential classes.
● The other residential segment corresponds to the other residential class.
● The commercial real estate segment includes the commercial real estate and industrial revenue bonds classes.
● The commercial construction segment includes the land development and commercial construction classes.
● The commercial business segment corresponds to the commercial business class.
● The consumer segment includes the consumer auto, consumer other and home equity lines of credit classes.

The following table presents the amortized cost basis of collateral-dependent loans by class of loans as of March 31, 2021:


	March 31, 2021
	Principal		Specific
	Balance		Allowance

	(In Thousands)
One- to four-family residential construction	$	—	$	—
Subdivision construction		—		—
Land development		622		367
Commercial construction		—		—
Owner occupied one- to four- family residential		3,950		73
Non-owner occupied one- to four-family residential		—		—
Commercial real estate		5,752		1,617
Other residential		185		—
Commercial business		—		—
Industrial revenue bonds		—		—
Consumer auto		—		—
Consumer other		—		—
Home equity lines of credit		393		—

Total	$	10,902	$	2,057

The following table presents information pertaining to impaired loans as of December 31, 2020, in accordance with previous GAAP prior to the ~~other residential class~~

·~~The commercial real estate segment includes the commercial real estate and industrial revenue bonds classes~~

·~~The commercial construction segment includes the land development and commercial construction classes~~

·~~The commercial business segment corresponds to the commercial business class~~

·~~The consumer segment includes the consumer auto, consumer other and home equity lines~~adoption of ~~credit classes~~

ASU 2016-13. A loan is considered impaired, in accordance with the impairment accounting guidance (FASB ASC 310-10-35-16), when based on current information and events, it is probable the Company will be unable to collect all amounts

due from the borrower in accordance with the contractual terms of the loan. Impaired loans include not only nonperforming loans but also include loans modified in troubled debt restructurings where concessions have been granted to borrowers experiencing financial difficulties.


	At or for the Year Ended December 31, 2020
							Average
			Unpaid				Investment		Interest
	Recorded		Principal		Specific		in Impaired		Income
	Balance		Balance		Allowance		Loans		Recognized

	(In Thousands)
One- to four-family residential construction	$	—	$	—	$	—	$	—	$	—
Subdivision construction		20		20		—		115		3
Land development		—		—		—		—		—
Commercial construction		—		—		—		—		—
Owner occupied one- to four- family residential		3,457		3,776		90		2,999		169
Non-owner occupied one- to four-family residential		69		106		—		309		18
Commercial real estate		3,438		3,472		445		3,736		135
Other residential		—		—		—		—		—
Commercial business		166		551		14		800		34
Industrial revenue bonds		—		—		—		—		—
Consumer auto		865		964		140		932		91
Consumer other		403		552		19		298		47
Home equity lines of credit		630		668		5		550		36

Total	$	9,048	$	10,109	$	713	$	9,739	$	533

~~Impaired loans (excluding FDIC-assisted loans, net of discount), are summarized as follows:~~

September 30, 2020

Unpaid

Recorded

Principal

Specific

Balance

Balance

Allowance

(In Thousands)

One- to four-family residential construction
$
-

$
-

$
-

Subdivision construction

22

22

-

Land development

-

-

-

Commercial construction

-

-

-

Owner occupied one- to four-family residential

3,342

3,460

78

Non-owner occupied one- to four-family residential

238

238

-

Commercial real estate

3,056

3,056

466

Other residential

-

-

-

Commercial business

197

210

15

Industrial revenue bonds

-

-

-

Consumer auto

1,024

1,040

166

Consumer other

333

355

17

Home equity lines of credit

553

558

4

Total
$
8,765

$
8,939

$
746

Three Months Ended
September 30, 2020

Nine Months Ended
September 30, 2020

Average

Average

Investment

Interest

Investment

Interest

in Impaired

Income

in Impaired

Income

Loans

Recognized

Loans

Recognized

(In Thousands)

One- to four-family residential construction
$
-

$
-

$
-

$
-
Subdivision construction

22

-

147

3
Land development

-

-

-

-
Commercial construction

-

-

-

-
Owner occupied one- to four-family residential

3,146

44

2,850

124
Non-owner occupied one- to four-family residential

267

-

372

11
Commercial real estate

3,829

30

3,946

97
Other residential

-

-

-

-
Commercial business

538

5

1,008

30
Industrial revenue bonds

-

-

-

-
Consumer auto

889

37

945

77
Consumer other

293

17

281

33
Home equity lines of credit

528

7

535

26

Total
$
9,512

$
140

$
10,084

$
401


	At or for the Three Months Ended March 31, 2020
							Average
			Unpaid				Investment		Interest
	Recorded		Principal		Specific		in Impaired		Income
	Balance		Balance		Allowance		Loans		Recognized

	(In Thousands)
One- to four-family residential construction	$	—	$	—	$	—	$	—	$	—
Subdivision construction		246		246		93		247		2
Land development		—		—		—		—		—
Commercial construction		—		—		—		—		—
Owner occupied one- to four- family residential		2,929		3,214		79		2,522		46
Non-owner occupied one- to four-family residential		494		694		18		433		6
Commercial real estate		4,109		4,143		506		4,122		30
Other residential		—		—		—		—		—
Commercial business		1,238		1,736		10		1,263		16
Industrial revenue bonds		—		—		—		—		—
Consumer auto		1,030		1,253		167		1,078		26
Consumer other		281		441		13		287		10
Home equity lines of credit		475		499		4		577		12

Total	$	10,802	$	12,226	$	890	$	10,529	$	148

At or for the Year Ended December 31, 2019

Average

Unpaid

Investment

Interest

Recorded

Principal

Specific

in Impaired

Income

Balance

Balance

Allowance

Loans

Recognized

(In Thousands)
One- to four-family residential construction
$
-

$
-

$
-

$
-

$
-
Subdivision construction

251

251

96

277

9
Land development

-

-

-

328

101
Commercial construction

-

-

-

-

-
Owner occupied one- to four- family residential

2,300

2,423

82

2,598

131
Non-owner occupied one- to four-family residential

409

574

20

954

43
Commercial real estate

4,020

4,049

517

4,940

264
Other residential

-

-

-

-

-
Commercial business

1,286

1,771

13

1,517

81
Industrial revenue bonds

-

-

-

-

-
Consumer auto

1,117

1,334

181

1,128

125
Consumer other

356

485

16

383

48
Home equity lines of credit

528

548

4

362

37

Total
$
10,267

$
11,435

$
929

$
12,487

$
839

September 30, 2019

Unpaid

Recorded

Principal

Specific

Balance

Balance

Allowance

(In Thousands)

One- to four-family residential construction
$
-

$
-

$
-

Subdivision construction

256

256

98

Land development

83

83

-

Commercial construction

-

-

-

Owner occupied one- to four-family residential

2,055

2,312

105

Non-owner occupied one- to four-family residential

795

980

21

Commercial real estate

4,286

4,312

569

Other residential

-

-

-

Commercial business

1,299

1,766

14

Industrial revenue bonds

-

-

-

Consumer auto

840

1,083

107

Consumer other

340

517

16

Home equity lines of credit

541

563

4

Total
$
10,495

$
11,872

$
934

Three Months Ended
September 30, 2019

Nine Months Ended
September 30, 2019

Average

Average

Investment

Interest

Investment

Interest

in Impaired

Income

in Impaired

Income

Loans

Recognized

Loans

Recognized

(In Thousands)

One- to four-family residential construction
$
-

$
-

$
-

$
-
Subdivision construction

269

2

285

7
Land development

83

2

428

101
Commercial construction

-

-

-

-
Owner occupied one- to four-family residential

2,042

23

2,745

80
Non-owner occupied one- to four-family residential

687

14

1,093

32
Commercial real estate

4,427

62

5,217

198
Other residential

-

-

-

-
Commercial business

1,370

7

1,590

65
Industrial revenue bonds

-

-

-

-
Consumer auto

883

21

1,121

64
Consumer other

331

12

399

34
Home equity lines of credit

447

13

318

30

Total
$
10,539

$
156

$
13,196

$
611

At ~~September 30,~~December 31, 2020, ~~$4.6~~$4.8 million of impaired loans had specific valuation allowances totaling ~~$746,000. At December 31, 2019, $5.2 million of impaired loans had specific valuation allowances totaling $929,000.~~$713,000.

~~Included in certain loan categories in the impaired loans are troubled debt restructurings that were classified as impaired.~~

Troubled debt restructurings ~~are~~(“TDRs”) by class is presented below as of March 31, 2021 and December 31, 2020. The December 31, 2020 table excludes $1.7 million of FDIC-acquired loans ~~that are modified by granting concessions to borrowers experiencing financial difficulties. These concessions could include a reduction~~accounted for under ASC 310-30, while the March 31, 2021 table includes the loans acquired through various FDIC-assisted transactions in the ~~interest rate on the~~ loan payment extensions, forgiveness of principal, forbearance or other actions intended to maximize collection. The types of concessions made are factored into the estimation of the allowance for loan losses for troubled debt restructurings primarily using a discounted cash flow or collateral adequacy approach.classes listed.


	March 31, 2021
	Accruing TDR Loans			Non-accruing TDR Loans			Total TDR Loans
	Number	Balance		Number	Balance		Number	Balance

	(In Thousands)
Construction and land development	1	$	18	—	$	—	1	$	18
One- to four-family residential	6		382	13		1,266	19		1,648
Other residential	—		—	—		—	—		—
Commercial real estate	1		1,768	1		88	2		1,856
Commercial business	—		—	1		67	1		67
Consumer	31		338	19		83	50		421
	39	$	2,506	34	$	1,504	73	$	4,010


	December 31, 2020
	Restructured
	Troubled Debt		Accruing		Restructured
	Non-accruing		Interest		Troubled Debt

	(In Thousands)
Commercial real estate	$	—	$	646	$	646
One- to four-family residential		778		1,121		1,899
Other residential		—		—		—
Construction		—		20		20
Commercial		75		52		127
Consumer		118		511		629
	$	971	$	2,350	$	3,321

The following tables present newly restructured loans, which were considered ~~troubled debt restructurings,~~TDRs, during the three ~~and nine~~ months ended ~~September 30,~~March 31, 2021 and 2020, ~~and 2019,~~ respectively, by type of modification:

Three Months Ended September 30, 2020

Total

Interest Only

Term

Combination

Modification

(In Thousands)
One- to four-family residential

-

-

647

647
Commercial real estate

-

-

559

559
Commercial business

-

-

22

22
Consumer

-

-

1,771

1,771
$
-

$
-

$
2,999

$
2,999

		~~Three Months Ended September 30, 2019~~
								~~Total~~
		~~Interest Only~~		~~Term~~		~~Combination~~		~~Modification~~
		~~(In Thousands)~~

~~Consumer~~	$	-	$	-	$	-	$	-


	Three Months Ended March 31, 2021
							Total
	Interest Only		Term		Combination		Modification

	(In Thousands)
Commercial Real Estate	$	1,768	$	—	$	—	$	1,768
Consumer		—		21		—		21
	$	1,768	$	21	$	—	$	1,789

Nine Months Ended September 30, 2020

Total

Interest Only

Term

Combination

Modification

(In Thousands)
One- to four-family residential
$
-

$
-

$
777

$
777
Commercial real estate

-

-

559

559
Commercial business

-

-

22

22
Consumer

-

16

1,847

1,863

$
-

$
16

$
3,205

$
3,221


	Three Months Ended March 31, 2020
							Total
	Interest Only		Term		Combination		Modification

	(In Thousands)
One- to four-family residential	$	—	$	—	$	130	$	130
Consumer		—		—		48		48
	$	—	$	—	$	178	$	178

Nine Months Ended September 30, 2019

Total

Interest Only

Term

Combination

Modification

(In Thousands)
Consumer
$
-

$
73

$
-

$
73

At ~~September 30, 2020,~~March 31, 2021, of the Company had $3.7 million of loans that were modified in troubled debt restructurings and impaired, as follows: $22,000 of construction and land development loans, $1.7 million of one- to four-family residential mortgage loans, $1.2 million of commercial real estate loans, $140,000 of commercial business loans and $680,000 of consumer loans. Of the total troubled debt restructurings at September 30, 2020, $1.9 million were accruing interest and $1.8 million were non-accrual assets. Of the $3.7$4.0 million in ~~troubled debt restructurings, $2.4~~TDRs, $3.3 million were classified as substandard using the Company’s internal grading system, which is described below. The Company had no ~~troubled debt restructurings which~~TDRs that were modified in the previous 12 months and subsequently defaulted during the ~~nine~~three months ended September 30, 2020. When loans modified as troubled debt restructurings have subsequent payment defaults, the defaults are factored into the determination of the allowance for loan losses to ensure specific valuation allowances reflect amounts considered uncollectible. March 31, 2021.

At December 31, ~~2019,~~2020, of the ~~Company had $1.9~~$3.3 million ~~of loans that were modified~~ in troubled debt restructurings and impaired, as follows: $251,000 of construction and land development loans, $768,000 of single family residential mortgage loans, $412,000 of commercial real estate loans, $156,000 of commercial business loans and $343,000 of consumer loans. Of the total troubled debt restructurings at December 31, 2019, $1.4TDRs, $1.6 million were ~~accruing interest and $562,000 were non-accrual assets and~~ classified as substandard using the Company’s internal grading system. The Company had no ~~troubled debt restructurings which~~TDRs that were modified in the previous 12 months and subsequently defaulted during the year ended December 31, ~~2019.~~ 2020.

During the three ~~and nine~~ months ended ~~September 30, 2020, one $155,000 one- to-~~March 31, 2021, there were four ~~family loan~~loans designated as ~~a troubled debt restructuring~~TDRs, totaling $27,000, which met the criteria for placement back on accrual status. The criteria are generally a minimum of six months of consistent and timely payment performance under original or modified terms. During the three ~~and nine~~ months ended ~~September 30, 2019, $0 and $63,000 of loans, respectively, all of which consisted of consumer~~March 31, 2020, there were no loans designated as ~~troubled debt restructurings~~TDRs that met the criteria for placement back on accrual status.

~~At September 30, 2020,~~In addition to the above loans considered TDRs, at March 31, 2021, the Company had remaining 8819 modified commercial loans with an aggregate principal balance outstanding of ~~$379~~$141 million and ~~407~~92 modified consumer and mortgage loans with an aggregate principal balance outstanding of ~~$17~~$5 million. At March 31, 2021, the largest total modified loans by collateral type were in the following categories: hotel/motel - $69 million; healthcare - $28 million; retail - $22 million; multifamily - $11 million.

At December 31, 2020, the Company had remaining 65 modified commercial loans with an aggregate principal balance outstanding of $233 million and 581 modified consumer and mortgage loans with an aggregate principal balance outstanding of $18 million.

The loan modifications are within the guidance provided by the CARES Act and subsequent legislation, the federal banking regulatory agencies, the ~~Securities and Exchange Commission~~SEC and the ~~Financial Accounting Standards Board;~~FASB; therefore, they are not considered troubled debt ~~restructurings~~restructurings. A portion of the loans modified at March 31, 2021, may be further modified, and new loans may be modified, within the guidance provided by the CARES Act (and subsequent legislation enacted in December 2020), the federal banking regulatory agencies, the SEC and the FASB if a more severe or ~~classified assets for regulatory purposes.~~

lengthier deterioration in economic conditions occurs in future periods.

The Company ~~reviews the credit quality of its loan portfolio using~~utilizes an internal ~~grading~~risk rating system comprised of a series of grades to categorize loans according to perceived risk associated with the expectation of debt repayment. The analysis of the borrower’s ability to repay considers specific information, including but not limited to current financial information, historical payment experience, industry information, collateral levels and collateral types. A risk rating is assigned at loan origination and then monitored throughout the contractual term for possible risk rating changes.

Satisfactory loans range from Excellent to Moderate Risk, but generally are loans supported by strong recent financial statements. Character and capacity of individuals or company are strong, including reasonable project performance, good industry experience, liquidity and/or net worth of individuals or company. Probability of financial deterioration seems unlikely. Repayment is expected from approved sources over a reasonable period of time.

Watch loans are identified when the borrower has capacity to perform according to terms; however, elements of uncertainty exist. Margins of debt service coverage may be narrow, historical patterns of financial performance may be erratic, collateral margins may be diminished and the borrower may be a new and/or thinly capitalized company. Some management weakness may also exist, the borrowers may have somewhat limited access to other financial institutions, and that ~~classifies~~ability may diminish in difficult economic times.

Special Mention loans as “Satisfactory,” “Watch,” “Special Mention,” “Substandard” and “Doubtful.” Loans classified as watch are being monitored because of indications of potential weaknesses or deficiencies that may require future classification as special mention or substandard. Special mention loans possess potentialhave weaknesses that deserve management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of repayment prospects or the Bank's credit position at some future date. It is a transitional grade that is closely monitored for improvement or deterioration.

~~close attention but do not expose~~

The Substandard rating is applied to loans where the ~~Bank to~~borrower exhibits well-defined weaknesses that jeopardize its continued performance and are of a ~~degree of risk~~severity that ~~warrants substandard classification. Substandard loans are characterized by~~ the distinct possibility ~~that the Bank will sustain some loss if certain deficiencies~~of default exists. Loans are placed on “non-accrual” when management does not ~~corrected.~~ expect to collect payments consistent with acceptable and agreed upon terms of repayment.

Doubtful loans ~~are those having~~have all the weaknesses inherent to those classified Substandard with the added characteristics that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, ~~conditions and values,~~ highly questionable and improbable. Loans ~~not meeting any~~considered loss are uncollectable and no longer included as an asset.

All loans are analyzed for risk rating updates regularly. For larger loans, rating assessments may be more frequent if relevant information is obtained earlier through debt covenant monitoring or overall relationship management. Smaller loans are monitored as identified by the loan officer based on the risk profile of the ~~criteria previously described~~individual borrower or if the loan becomes past due related to credit issues. Loans rated Watch, Special Mention, Substandard or Doubtful are ~~considered satisfactory.~~ subject to quarterly review and monitoring processes. In addition to the regular monitoring performed by the lending personnel and credit committees, loans are subject to review by the credit review department, which verifies the appropriateness of the risk ratings for the loans chosen as part of its risk-based review plan.

The following tables present a summary of loans by risk category and past due status separated by origination and loan class as of March 31, 2021. The March 31, 2021 table was prepared using the CECL methodology and includes $91.9 million in FDIC-assisted acquired loans ~~are evaluated using~~included in the loan class categories. The remaining accretable discount of $1.3 million has not been included in this internal grading system. These loans are accounted for in pools. Minimal adverse classification in these acquired loan pools was identified as of September 30, 2020 and December 31, 2019, respectively.table. See Note 7for further discussion of the FDIC-acquired loans and related discount. The December 31, 2020 table was prepared using the previous GAAP incurred loss methodology prior to the adoption of ASU 2016-13. The $98.6 million in FDIC-assisted acquired ~~loan pools and the termination of the loss sharing agreements.~~

~~The Company evaluates~~loans are shown as a total, not within the loan risk internal grading system definitions and allowance for loan loss methodology on an ongoing basis. The general component of the allowance for loan losses is affected by several factors, including, but not limited to, average historical losses, average life of the loans, current composition of the loan portfolio, current and expected economic conditions, collateral values and internal risk ratings. Management considers all these factors in determining the adequacy of the Company’s allowance for loan losses. In early 2018, we expanded our loan risk rating system to allow for further segregation of satisfactory credits. No significant changes were made to the allowance for loan loss methodology during the year ended December 31, 2019 or the nine months ended September 30, 2020. However, the deterioration of economic conditions that occurred in the nine months ended September 30, 2020 and was expected to continue thereafter was a significant factor in the determination of the allowance for loan losses.class categories.

~~The loan grading system is presented by loan class below:~~

September 30, 2020

Special

Satisfactory

Watch

Mention

Substandard

Doubtful

Total

(In Thousands)
One- to four-family residential

   construction
$
37,303

$
1,200

$
-

$
-

$
-

$
38,503
Subdivision construction

10,444

-

-

22

-

10,466
Land development

40,224

-

-

-

-

40,224
Commercial construction

1,206,342

-

-

-

-

1,206,342
Owner occupied one- to four-

   family residential

475,479

-

-

2,634

-

478,113
Non-owner occupied one- to four-

   family residential

117,141

321

-

237

-

117,699
Commercial real estate

1,480,891

52,496

-

3,056

-

1,536,443
Other residential

1,018,359

-

-

-

-

1,018,359
Commercial business

428,800

10,258

-

141

-

439,199
Industrial revenue bonds

14,165

-

-

-

-

14,165
Consumer auto

98,659

18

-

607

-

99,284
Consumer other

41,003

86

-

244

-

41,333
Home equity lines of credit

113,793

40

-

524

-

114,357
Loans acquired and accounted

   for under ASC 310-30,

   net of discounts

106,117

-

-

11

-

106,128

Total
$
5,188,720

$
64,419

$
-

$
7,476

$
-

$
5,260,615

December 31, 2019

Special

��

Satisfactory

Watch

Mention

Substandard

Doubtful

Total

(In Thousands)
One- to four-family residential

   construction
$
33,963

$
-

$
-

$
-

$
-

$
33,963
Subdivision construction

16,061

27

-

-

-

16,088
Land development

40,431

-

-

-

-

40,431
Commercial construction

1,322,861

-

-

-

-

1,322,861
Owner occupied one- to-four-

   family residential

385,001

26

-

1,989

-

387,016
Non-owner occupied one- to-

   four-family residential

119,743

419

-

181

-

120,343
Commercial real estate

1,458,400

32,063

-

3,709

-

1,494,172
Other residential

866,006

-

-

-

-

866,006
Commercial business

307,322

4,651

-

1,236

-

313,209
Industrial revenue bonds

13,189

-

-

-

-

13,189
Consumer auto

150,874

47

-

933

-

151,854
Consumer other

46,294

92

-

334

-

46,720
Home equity lines of credit

118,428

43

-

517

-

118,988
Loans acquired and accounted

   for under ASC 310-30,

   net of discounts

127,192

-

-

14

-

127,206

Total
$
5,005,765

$
37,368

$
-

$
8,913

$
-

$
5,052,046


	Term Loans by Origination Year
													Revolving
	2021 YTD		2020		2019		2018		2017		Prior		Loans		Total

	(In Thousands)
One- to four-family residential construction
Satisfactory (1‑4)	$	1,938	$	17,826	$	1,265	$	0	$	0	$	6	$	230	$	21,265
Watch (5)		0		0		1,364		0		0		0		0		1,364
Special Mention (6)		0		0		0		0		0		0		0		0
Classified (7‑9)		0		0		0		0		0		0		0		0
Total		1,938		17,826		2,629		0		0		6		230		22,629

Subdivision construction
Satisfactory (1‑4)		124		1,270		364		302		1,033		1,346		0		4,439
Watch (5)		0		0		0		0		0		0		0		0
Special Mention (6)		0		0		0		0		0		0		0		0
Classified (7‑9)		0		0		0		0		0		18		0		18
Total		124		1,270		364		302		1,033		1,364		0		4,457

Land development construction
Satisfactory (1‑4)		1,756		22,678		10,850		5,110		3,623		8,493		1,463		53,973
Watch (5)		0		0		0		0		0		0		0		—
Special Mention (6)		0		0		0		0		0		0		0		0
Classified (7‑9)		0		0		0		0		0		0		622		622
Total		1,756		22,678		10,850		5,110		3,623		8,493		2,085		54,595

Other Construction
Satisfactory (1‑4)		20,302		138,048		198,014		117,966		338		0		0		474,668
Watch (5)		0		0		0		0		0		0		0		0
Special Mention (6)		0		0		0		0		0		0		0		0
Classified (7‑9)		0		0		0		0		0		0		0		0
Total		20,302		138,048		198,014		117,966		338		0		0		474,668

One- to four-family residential
Satisfactory (1‑4)		52,744		206,419		127,958		82,345		16,902		150,571		1,690		638,629
Watch (5)		0		0		0		134		0		228		77		439
Special Mention (6)		0		0		0		0		0		0		0		0
Classified (7‑9)		0		0		138		0		200		2,046		110		2,494
Total		52,744		206,419		128,096		82,479		17,102		152,845		1,877		641,562

Other residential
Satisfactory (1‑4)		9,227		83,544		176,111		388,986		241,625		126,407		3,718		1,029,618
Watch (5)		0		0		0		0		0		3,490		0		3,490
Special Mention (6)		0		0		0		0		0		0		0		0
Classified (7‑9)		0		0		0		0		0		0		0		0
Total		9,227		83,544		176,111		388,986		241,625		129,897		3,718		1,033,108

Commercial real estate
Satisfactory (1‑4)		10,906		130,305		226,502		240,367		242,150		659,242		19,838		1,529,310
Watch (5)		0		0		0		0		11,555		21,856		595		34,006
Special Mention (6)		0		0		0		0		0		0		0		0
Classified (7‑9)		0		0		0		0		0		5,428		0		5,428
Total		10,906		130,305		226,502		240,367		253,705		686,526		20,433		1,568,744

Commercial business
Satisfactory (1‑4)		58,669		80,786		26,780		25,359		25,903		65,918		49,485		332,900
Watch (5)		0		0		0		2,626		14		2,775		11		5,426
Special Mention (6)		0		0		0		0		0		0		0		0
Classified (7‑9)		0		0		0		0		0		67		40		107
Total		58,669		80,786		26,780		27,985		25,917		68,760		49,536		338,433

Consumer
Satisfactory (1‑4)		5,822		17,926		13,028		17,351		8,692		39,086		124,413		226,318
Watch (5)		0		12		0		24		3		45		31		115
Special Mention (6)		0		0		0		0		0		0		0		0
Classified (7‑9)		0		4		12		61		48		435		471		1,031
Total		5,822		17,942		13,040		17,436		8,743		39,566		124,915		227,464

Combined
Satisfactory (1‑4)		161,488		698,802		780,872		877,786		540,266		1,051,069		200,837		4,311,120
Watch (5)		0		12		1,364		2,784		11,572		28,394		714		44,840
Special Mention (6)		0		0		0		0		0		0		0		0
Classified (7‑9)		0		4		150		61		248		7,994		1,243		9,700
Total	$	161,488	$	698,818	$	782,386	$	880,631	$	552,086	$	1,087,457	$	202,794	$	4,365,660


	December 31, 2020
					Special
	Satisfactory		Watch		Mention		Substandard		Doubtful		Total

	(In Thousands)
One- to four-family residential construction	$	41,428	$	1,365	$	0	$	—	$	0	$	42,793
Subdivision construction		30,874		—		0		20		0		30,894
Land development		54,010		—		0		—		0		54,010
Commercial construction		1,212,837		—		0		—		0		1,212,837
Owner occupied one- to-four-family residential		467,855		216		0		2,365		0		470,436
Non-owner occupied one- to-four-family residential		114,176		324		0		69		0		114,569
Commercial real estate		1,498,031		52,208		0		3,438		0		1,553,677
Other residential		1,017,648		3,497		0		—		0		1,021,145
Commercial business		363,681		7,102		—		115		0		370,898
Industrial revenue bonds		14,003		—		0		—		0		14,003
Consumer auto		85,657		5		0		511		0		86,173
Consumer other		40,514		2		0		246		0		40,762
Home equity lines of credit		114,049		39		0		601		0		114,689
Loans acquired and accounted for under ASC 310‑30, net of discounts		98,633		—		0		10		0		98,643

Total	$	5,153,396	$	64,758	$	0	$	7,375	$	0	$	5,225,529

NOTE 7: FDIC-ASSISTED ACQUIRED LOANS

On March 20, 2009, Great Southern Bank entered into a purchase and assumption agreement with loss share with the Federal Deposit Insurance Corporation (FDIC) to assume all of the deposits (excluding brokered deposits) and acquire certain assets of TeamBank, N.A., a full service commercial bank headquartered in Paola, Kansas. The related loss sharing agreement was terminated early, effective April 26, 2016, by mutual agreement of Great Southern Bank and the FDIC. Based upon the acquisition date fair values of the net assets acquired, no0 goodwill was recorded.

On September 4, 2009, Great Southern Bank entered into a purchase and assumption agreement with loss share with the FDIC to assume all of the deposits and acquire certain assets of Vantus Bank, a full service thrift headquartered in Sioux City, Iowa. The related loss sharing agreement was terminated early, effective April 26, 2016, by mutual agreement of Great Southern Bank and the FDIC. Based upon the acquisition date fair values of the net assets acquired, no0 goodwill was recorded.

On October 7, 2011, Great Southern Bank entered into a purchase and assumption agreement with loss share with the FDIC to assume all of the deposits and acquire certain assets of Sun Security Bank, a full service bank headquartered in Ellington, Missouri. The related loss sharing agreement was terminated early, effective April 26, 2016, by mutual agreement of Great Southern Bank and the FDIC. Based upon the acquisition date fair values of the net assets acquired, no0 goodwill was recorded.

On April 27, 2012, Great Southern Bank entered into a purchase and assumption agreement with loss share with the FDIC to assume all of the deposits and acquire certain assets of Inter Savings Bank, FSB (“InterBank”), a full service bank headquartered in Maple Grove, Minnesota. The related loss sharing agreement was terminated early, effective June 9, 2017, by mutual agreement of Great Southern Bank and the FDIC. Based upon the acquisition date fair values of the net assets acquired, no0 goodwill was recorded.

On June 20, 2014, Great Southern Bank entered into a purchase and assumption agreement with the FDIC to purchase a substantial portion of the loans and investment securities, as well as certain other assets, and assume all of the deposits, as well as certain other liabilities, of Valley Bank, a full-service bank headquartered in Moline, Illinois, with significant operations in Iowa. This transaction did not include a loss sharing agreement. Based upon the acquisition date fair values of the net assets acquired, no0 goodwill was recorded.

The following table presents the balances of the acquired loans related to the various FDIC-assisted transactions at ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019.~~2020.

Sun Security

TeamBank

Vantus Bank

Bank

InterBank

Valley Bank

(In Thousands)

September 30, 2020

Gross loans receivable
$
6,019

$
8,502

$
14,479

$
49,483

$
32,435

Balance of accretable discount
due to change in expected losses

(108
)

(40
)

(212
)

(1,761
)

(815
)
Net carrying value to loans receivable

(5,882
)

(8,449
)

(14,163
)

(46,722
)

(30,913
)
Expected loss remaining
$
29

$
13

$
104

$
1,000

$
707

December 31, 2019

Gross loans receivable
$
7,304

$
9,899

$
17,906

$
60,430

$
41,032

Balance of accretable discount
due to change in expected losses

(159
)

(89
)

(374
)

(5,143
)

(1,803
)
Net carrying value to loans receivable

(7,118
)

(9,797
)

(17,392
)

(54,442
)

(38,452
)
Expected loss remaining
$
27

$
13

$
140

$
845

$
777


					Sun Security
	TeamBank		Vantus Bank		Bank		InterBank		Valley Bank

	(In Thousands)
March 31, 2021
Gross loans receivable	$	5,070	$	6,786	$	11,913	$	41,278	$	28,201
Balance of accretable discount due to change in expected losses		(88)		(31)		(124)		(614)		(457)
Net carrying value of loans receivable	$	4,982	$	6,755	$	11,789	$	40,664	$	27,744

December 31, 2020
Gross loans receivable	$	5,393	$	8,052	$	13,395	$	44,215	$	31,515
Balance of accretable discount due to change in expected losses		(97)		(35)		(180)		(1,079)		(612)
Expected loss remaining		(30)		(13)		(104)		(1,079)		(699)
Net carrying value of loans receivable	$	5,266	$	8,004	$	13,111	$	42,057	$	30,204

Fair Value and Expected Cash Flows. At the time of these acquisitions, the Company determined the fair value of the loan portfolios based on several assumptions. Factors considered in the valuations were projected cash flows for the loans, type of loan and related collateral, classification status, fixed or variable interest rate, term of loan, current discount rates and whether or not the loan was amortizing. Loans were grouped together according to similar characteristics and were treated in the aggregate when applying various valuation techniques. Management also estimated the amount of credit losses that were expected to be realized for the loan portfolios. The discounted cash flow approach was used to value each pool of loans. For non-performing loans, fair value was estimated by calculating the present value of the recoverable cash flows using a discount rate based on comparable corporate bond rates.

The amount of the estimated cash flows expected to be received from the acquired loan pools in excess of the fair values recorded for the loan pools is referred to as the accretable yield. The accretable yield is recognized as interest income over the estimated lives of the loans. The Company continues to evaluate the fair value of the loans including cash flows expected to be collected. Increases in the Company’s cash flow expectations are recognized as increases to the accretable yield while decreases are recognized as impairments through the allowance for loan losses. During the three months ended September 30, 2020 and 2019, improvements in expected cash flows (reclassification of discounts from non-accretable to accretable) related to the acquired loan portfolios resulted in adjustments of $0 and $5.1 million, respectively, to the accretable yield to be spread over the estimated remaining lives of the loans on a level-yield basis. During the nine months ended September 30, 2020 and 2019, improvements in expected cash flows (reclassification of discounts from non-accretable to accretable) related to the acquired loan portfolios resulted in adjustments of $0 and $10.4 million, respectively, to the accretable yield to be spread over the estimated remaining lives of the loans on a level-yield basis.

Because the balance of these adjustments to accretable yield will be recognized generally over the remaining lives of the loan pools, they will impact future periods as well. As of ~~September 30, 2020,~~March 31, 2021, the remaining accretable yield

adjustment that will affect interest income is ~~$2.9~~$1.3 million. Of the remaining adjustments affecting interest income, we expect to recognize ~~$932,000~~approximately $900,000 of interest income during the ~~three months ending December 31, 2020.~~

remainder of 2021. As of January 1, 2021, we adopted the new accounting standard related to accounting for credit losses. With the adoption of this standard, there will be no further reclassification of discounts from non-accretable to accretable. All adjustments made prior to January 1, 2021 will continue to be accreted to interest income.

The impact to income of adjustments on the Company’s financial results is shown below:


							Three Months Ended			Three Months Ended
							March 31, 2021			March 31, 2020
		Three Months Ended			Three Months Ended
		September 30, 2020			September 30, 2019
		(In Thousands, Except Per Share Data and Basis Points Data)

							(In Thousands, Except Per Share Data and Basis Points Data)
Impact on net interest income/
net interest margin (in basis points)	$	1,229	9 bps	$	2,251	20 bps	$	691	5 bps	$	1,866	16 bps
Net impact to pre-tax income	$	1,229		$	2,251		$	691		$	1,866
Net impact net of taxes	$	949		$	1,738		$	533		$	1,441
Impact to diluted earnings per share	$	0.07		$	0.12		$	0.04		$	0.10

Nine Months Ended

Nine Months Ended

September 30, 2020

September 30, 2019

(In Thousands, Except Per Share Data and Basis Points Data)

Impact on net interest income/

net interest margin (in basis points)
$
4,632
12 bps

$
5,162
15 bps
Net impact to pre-tax income
$
4,632

$
5,162

Net impact net of taxes
$
3,576

$
3,985

Impact to diluted earnings per share
$
0.25

$
0.28

~~Changes in the accretable yield for acquired loan pools were as follows for the three and nine months ended September 30, 2020 and 2019:~~

Sun Security

TeamBank

Vantus Bank

Bank

InterBank

Valley Bank

(In Thousands)

Balance, July 1, 2020
$
918

$
954

$
1,893

$
5,252

$
4,123

Accretion

(94
)

(238
)

(238
)

(1,599
)

(658
)
Change in expected accretable yield(1)

178

88

79

808

92

Balance, September 30, 2020
$
1,002

$
804

$
1,734

$
4,461

$
3,557

Balance, July 1, 2019
$
1,350

$
1,227

$
1,859

$
8,465

$
5,544

Accretion

(196
)

(259
)

(414
)

(2,371
)

(1,257
)
Change in expected accretable yield(1)

(9
)

305

872

2,840

1,565

Balance, September 30, 2019
$
1,145

$
1,273

$
2,317

$
8,934

$
5,852

~~(1)~~

Represents increases (decreases) in estimated cash flows expected to be received from the acquired loan pools, partially due to lower estimated credit losses. The amounts also include changes in expected accretion of the loan pools for TeamBank, Vantus Bank, Sun Security Bank, InterBank and Valley Bank for the three months ended September 30, 2020, totaling $178,000, $88,000, $79,000, $808,000 and $92,000, respectively, and for the three months ended September 30, 2019, totaling $(21,000), $132,000, $565,000, $(644,000) and $482,000, respectively.

Sun Security

TeamBank

Vantus Bank

Bank

InterBank

Valley Bank

(In Thousands)

Balance, January 1, 2020
$
1,157

$
1,123

$
1,948

$
8,277

$
4,578

Accretion

(334
)

(657
)

(831
)

(5,563
)

(2,398
)
Change in expected accretable yield(1)

179

338

617

1,747

1,377

Balance, September 30, 2020
$
1,002

$
804

$
1,734

$
4,461

$
3,557

Balance, January 1, 2019
$
1,356

$
1,432

$
2,242

$
4,994

$
3,063

Accretion

(811
)

(738
)

(1,195
)

(6,350
)

(3,243
)
Change in expected accretable yield(1)

600

579

1,270

10,290

6,032

Balance, September 30, 2019
$
1,145

$
1,273

$
2,317

$
8,934

$
5,852

~~(1)~~

Represents increases (decreases) in estimated cash flows expected to be received from the acquired loan pools, partially due to lower estimated credit losses. The amounts also include changes in expected accretion of the loan pools for TeamBank, Vantus Bank, Sun Security Bank, InterBank and Valley Bank for the nine months ended September 30, 2020, totaling $179,000, $338,000, $617,000, $1.7 million and $1.4 million, respectively, and for the nine months ended September 30, 2019, totaling $526,000, $406,000, $812,000, $4.0 million and $2.7 million, respectively.

NOTE 8: OTHER REAL ESTATE OWNED AND REPOSSESSIONS

Major classifications of other real estate owned were as follows:


					March 31,		December 31,
					2021		2020
		September 30,		December 31,
		2020		2019
		(In Thousands)

					(In Thousands)
Foreclosed assets held for sale and repossessions
One- to four-family construction	$	-	$	-	$	—	$	—
Subdivision construction		350		689		169		263
Land development		1,075		1,816		250		250
Commercial construction		-		-		—		—
One- to four-family residential		-		601		111		111
Other residential		-		-		—		—
Commercial real estate		-		-		—		—
Commercial business		-		-		—		—
Consumer		196		545		174		153
		1,621		3,651
Foreclosed assets acquired through FDIC-assisted
transactions, net of discounts		446		1,003

						704		777
Foreclosed assets acquired through FDIC-assisted transactions, net of discounts						615		446

Foreclosed assets held for sale and repossessions, net		2,067		4,654		1,319		1,223


Other real estate owned not acquired through foreclosure		940		871		532		654


Other real estate owned and repossessions	$	3,007	$	5,525	$	1,851	$	1,877

At ~~September 30, 2020~~March 31, 2021 other real estate owned not acquired through foreclosure included ~~seven~~5 properties, all of which were branch locations that were closed and held for sale. NaN property that was held for sale at March 31, 2021 was under contract for sale. The sale was completed in April 2021, with no additional loss to the Company. At December 31, ~~2019,~~2020, other real estate owned not acquired through foreclosure included ~~six~~7 properties all of which were branch locations that were closed and held for sale.

At ~~September 30, 2020,~~March 31, 2021, residential mortgage loans totaling ~~$787,000~~$220,000 were in the process of foreclosure, ~~$657,000~~$161,000 of which were acquired ~~loans.~~loans related to FDIC-assisted transactions. Pursuant to Section 4022 of the ~~recently-enacted~~ CARES Act, the Company has suspended all foreclosure proceedings. Under this provision, no mortgage servicer of any federally-backed mortgage loan is permitted to initiate any foreclosure process, whether judicial or non-judicial, move for a foreclosure judgment or order of sale, or execute a foreclosure- related eviction or foreclosure sale for a 60-day period, beginning March 18, 2020. This provision was subsequently extended through ~~the end of 2020.~~

June 30, 2021. At December 31, ~~2019,~~2020, residential mortgage loans totaling ~~$1.6 million~~$602,000 were in the process of foreclosure, ~~$1.4~~$518,000 million of which were acquired ~~loans.~~

loans related to FDIC-assisted transactions.

Expenses applicable to other real estate owned and repossessions included the following:


							Three Months Ended
							March 31,
							2021		2020
		Three Months Ended
		September 30,
		2020			2019
		(In Thousands)

							(In Thousands)
Net gains on sales of other real estate owned and repossessions	$	(348	)	$	(250	)	$	(46)	$	(96)
Valuation write-downs		269			280			82		163
Operating expenses, net of rental income		278			573			232		412

	$	199		$	603

							$	268	$	479

Nine Months Ended

September 30,

2020

2019

(In Thousands)

Net gains on sales of other real estate owned and repossessions
$
(450
)
$
(659
)
Valuation write-downs

482

724

Operating expenses, net of rental income

914

1,577

$
946

$
1,642

NOTE 9: PREMISES AND EQUIPMENT

Major classifications of premises and equipment, stated at cost, were as follows:


						March 31,		December 31,
						2021		2020
		September 30,			December 31,
		2020			2019
		(In Thousands)

						(In Thousands)
Land	$	40,621	$	40,632		$	40,652	$	40,652
Buildings and improvements		99,553		96,959			100,514		100,187
Furniture, fixtures and equipment		58,700		56,986			57,989		59,226
Operating leases right of use asset		8,758		8,668			8,313		8,536
		207,632		203,245
							207,468		208,601
Less accumulated depreciation		67,130		61,337			69,784		69,431

	$	140,502	$	141,908

						$	137,684	$	139,170

Leases.The Company adopted ASU 2016-02, Leases (Topic 842), on January 1, 2019, using the modified retrospective transition approach whereby comparative periods were not restated. The Company also elected certain relief options under the ASU, including the option not to recognize right of use asset and lease liabilities that arise

from short-term leases (leases with terms of twelve months or less). Adoption of this ASU resulted in the Company initially recognizing a right of use asset and corresponding lease liability of ~~$9.5~~$9.5 million ~~during the three months ended March 31,~~as of January 1, 2019. The amount of the right of use asset and corresponding lease liability will fluctuate based on the Company’s lease terminations, new leases and lease modifications and renewals. As of ~~September 30, 2020,~~March 31, 2021, the lease right toof use asset value was ~~$8.8~~$8.3 million and the corresponding lease liability was ~~$8.9~~$8.5 million.

As of December 31, 2020, the lease right of use asset value was $8.5 million and the corresponding lease liability was $8.7 million.

All of our leases are classified as operating leases (as they were prior to January 1, 2019), and therefore were previously not recognized on the Company’s consolidated statements of financial condition. With the adoption of ASU 2016-02, these operating leases are now included as a right of use asset in the premises and equipment line item on the Company’s consolidated statements of financial condition. The corresponding lease liability is included in the accrued expenses and other liabilities line item on the Company’s consolidated statements of financial condition. Because these leases are classified as operating leases, the adoption of the new standard did not have a material effect on lease expense on the Company’s consolidated statements of income.

ASU 2016-02 provides a number of optional practical expedients in transition. The Company has elected the “package of practical expedients,” which permits the Company not to reassess under the new standard the prior conclusions about lease identification, lease classification and initial direct costs. The Company also elected the use of the hindsight, a practical expedient which permits the use of information available after lease inception to determine the lease term via the knowledge of renewal options exercised not available as of the lease’s inception. The practical expedient pertaining to land easements is not applicable to the Company.

ASU 2016-02 also requires certain other accounting elections. The Company elected the short-term lease recognition exemption for all leases that qualify, meaning those with terms under twelve months. Right of use assets or lease liabilities are not to be recognized for short-term leases. The Company also elected the practical expedient to not separate lease and non-lease components for all leases. The Company’s short-term leases related to offsite ATMs have both fixed and variable lease payment components, based on the number of transactions at the various ATMs. The variable portion of these lease payments is not material and the total lease expense related to ATMs for the three months ended ~~September 30,~~March 31, 2021 and 2020 was $66,000 and ~~2019 was $76,000 and $71,000,~~$62,000, respectively. ~~The total lease expense related to ATMs for the nine months ended September 30, 2020 and 2019, was $202,000 and $221,000, respectively.~~

The calculated amounts of the right of use assets and lease liabilities in the table below are impacted by the length of the lease term and the discount rate used to present value the minimum lease payments. The Company’s lease agreements often include one or more options to renew the extended term in the calculation of the right of use asset and lease liability. Regarding the discount rate, the ASU requires the use of the rate implicit in the lease at the Company’s discretion. If at lease inception, the Company considers the exercising of a renewal option to be reasonably certain, the Company will include the extended term in the calculation of the right of use asset and lease liability. Regarding the discount rate, the ASU requires the use of the rate implicit in the lease whenever this rate is readily determinable. As this rate is rarely determinable, the Company utilizes its incremental borrowing rate at lease inception over a similar term. The discount rate utilized was the FHLBank borrowing rate for the term corresponding to the expected term of the lease. The remaining expected lease terms range from ~~2.8~~0.5 years to ~~18.4~~17.7 years with a weighted-average lease term of ~~9.5~~8.0 years. The weighted-average discount rate was 3.24%.


	At or For the Three Months Ended
	March 31, 2021		March 31, 2020

	(In Thousands)
Statement of Financial Condition
Operating leases right of use asset	$	8,313	$	8,446
Operating leases liability	$	8,452	$	8,539

Statement of Income
Operating lease costs classified as occupancy and equipment expense	$	374	$	385
(includes short-term lease costs and amortization of right of use asset)

Supplemental Cash Flow Information
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	361	$	371

At or For the Three Months Ended

September 30, 2020

September 30, 2019

(In Thousands)
Statement of Financial Condition

Operating leases right of use asset
$
8,758
$
8,888
Operating leases liability
$
8,869
$
8,952

Statement of Income

Operating lease costs classified as occupancy and equipment expense
$
397
$
344
(includes short-term lease costs and amortization of right of use asset)

Supplemental Cash Flow Information

Cash paid for amounts included in the measurement of lease liabilities:

Operating cash flows from operating leases
$
391
$
326

At or For the Nine Months Ended

September 30, 2020

September 30, 2019

(In Thousands)
Statement of Financial Condition

Operating leases right of use asset
$
8,758
$
8,888
Operating leases liability
$
8,869
$
8,952

Statement of Income

Operating lease costs classified as occupancy and equipment expense
$
1,182
$
1,092
(includes short-term lease costs and amortization of right of use asset)

Supplemental Cash Flow Information

Cash paid for amounts included in the measurement of lease liabilities:

Operating cash flows from operating leases
$
1,149
$
1,028
Right of use assets obtained in exchange for lease obligations:

Operating leases
$
972
$
9,538

For the three months ended ~~September 30,~~March 31, 2021 and 2020, ~~and 2019,~~ lease expense was ~~$397,000~~$374,000 and ~~$344,000, respectively. For the nine months ended September 30, 2020 and 2019, lease expense was $1.2 million and $1.1 million,~~$385,000, respectively. At ~~September 30, 2020,~~March 31, 2021, future expected lease payments for leases with terms exceeding one year were as follows (In Thousands):

2020	$	267

2021		1,118		$	871
2022		1,116			1,116
2023		1,088			1,088
2024		1,005			1,005
2025		979			979
2026					912
Thereafter		4,926			4,015


Future lease payments expected		10,499			9,986


Less interest portion of lease payments		(1,630	)		(1,534)


Lease liability	$	8,869		$	8,452

The Company does not sublease any of its leased facilities; however, it does lease to other third parties portions of facilities that it owns. In terms of being the lessor in these circumstances, all of these lease agreements are classified as operating leases. In the three months ended ~~September 30,~~March 31, 2021 and 2020, ~~and 2019,~~ income recognized from these lessor agreements was ~~$294,000~~$291,000 and ~~$289,000,~~$299,000, respectively, and was included in occupancy and equipment expense. ~~In the nine months ended September 30, 2020 and 2019, income recognized from these lessor agreements was $864,000 and $849,000, respectively, and was included in occupancy and equipment expense.~~

NOTE 10: DEPOSITS

September 30,

December 31,

2020

2019

(In Thousands)

Time Deposits:

0.00% - 0.99%
$
649,949

$
122,649
1.00% - 1.99%

657,893

523,816
2.00% - 2.99%

183,472

1,053,914
3.00% - 3.99%

18,733

19,849
4.00% - 4.99%

425

881
Total time deposits (weighted average rate 1.19% and 2.09%)

1,510,472

1,721,109
Non-interest-bearing demand deposits

881,298

687,068
Interest-bearing demand and savings deposits
(Weighted average rate 0.29% and 0.55%)

2,051,987

1,551,929
Total Deposits
$
4,443,757

$
3,960,106


	March 31,		December 31,
	2021		2020

	(In Thousands)
Time Deposits:
0.00% - 0.99%	$	928,694	$	803,737
1.00% - 1.99%		194,740		425,061
2.00% - 2.99%		110,265		143,417
3.00% and above		17,927		18,577
Total time deposits (weighted average rate 0.83% and 1.00%)		1,251,626		1,390,792
Non-interest-bearing demand deposits		1,061,781		984,798
Interest-bearing demand and savings deposits (Weighted average rate 0.19% and 0.22%)		2,313,529		2,141,313
Total Deposits	$	4,626,936	$	4,516,903

NOTE 11: ADVANCES FROM FEDERAL HOME LOAN BANK

At ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019,~~2020, there were no0 outstanding term advances from the Federal Home Loan Bank of Des Moines (FHLBank advances). There were 0 overnight funds from the Federal Home Loan Bank of Des Moines as of March 31, 2021 or December 31, ~~2019, which are included below in~~ ~~Note 12~~.2020.

NOTE 12: SECURITIES SOLD UNDER REVERSE REPURCHASE AGREEMENTS AND SHORT-TERM BORROWINGS


					March 31, 2021		December 31, 2020
		September 30, 2020		December 31, 2019
		(In Thousands)

					(In Thousands)
Notes payable – Community Development Equity Funds	$	1,218	$	1,267	$	1,216	$	1,518
Other interest-bearing liabilities		-		30,890		1,420		—
Overnight borrowings from the Federal Home Loan Bank		-		196,000
Securities sold under reverse repurchase agreements		155,042		84,167		140,666		164,174

	$	156,260	$	312,324

					$	143,302	$	165,692

The Bank enters into sales of securities under agreements to repurchase (reverse repurchase agreements). Reverse repurchase agreements are treated as financings, and the obligations to repurchase securities sold are reflected as a liability in the statements of financial condition. The dollar amount of securities underlying the agreements remains in the asset accounts. Securities underlying the agreements are being held by the Bank during the agreement period. All agreements are written on a term of one month or less.

At December 31, 2019, other interest-bearing liabilities consisted of cash collateral held by the Company to satisfy minimum collateral posting thresholds with its derivative dealer counterparties representing the termination value of derivatives, which at such time were in a net asset position. Under the collateral agreements between the parties, either party may choose to provide cash or securities to satisfy its collateral requirements. Effective March 2, 2020, the Company and its swap counterparty mutually agreed to terminate the Company’s interest rate swap eliminating the cash collateral held. For additional information, see “Cash Flow Hedges” in ~~Note 16~~.

The following table represents the Company’s securities sold under reverse repurchase agreements, by collateral type and remaining contractual maturity.

September 30, 2020

December 31, 2019

Overnight and

Overnight and

Continuous

Continuous

(In Thousands)

Mortgage-backed securities – GNMA, FNMA, FHLMC
$
155,042

$
84,167


	March 31, 2021		December 31, 2020
	Overnight and		Overnight and
	Continuous		Continuous

	(In Thousands)
Mortgage-backed securities – GNMA, FNMA, FHLMC	$	140,666	$	164,174

NOTE 13: SUBORDINATED NOTES

On August 8, 2016, the Company completed the public offering and sale of $75.0 million of its subordinated notes. The notes are due August 15, 2026, and have a fixed interest rate of 5.25% until August 15, 2021, at which time the rate becomes floating at a rate equal to three-month LIBOR plus 4.087%. The Company may call the notes at par beginning on August 15, 2021, and on any scheduled interest payment date thereafter. The notes were sold at par, resulting in net proceeds, after underwriting discounts and commissions, legal, accounting and other professional fees, of approximately $73.5 million. Total debt issuance costs of approximately $1.5 million were deferred and are being amortized over the expected life of the notes, which is five years.

On June 10, 2020, the Company completed the public offering and sale of $75.0 million of its subordinated notes. The notes are due June 15, 2030, and have a fixed interest rate of 5.50% until June 15, 2025, at which time the rate becomes floating at a rate expected to be equal to three-month term Secured Overnight Financing Rate (SOFR) plus 5.325%. The Company may call the notes at par beginning on June 15, 2025, and on any scheduled interest payment date thereafter. The notes were sold at par, resulting in net

proceeds, after underwriting discounts and commissions, legal, accounting and other professional fees, of approximately $73.5 million. Total debt issuance costs of approximately $1.5 million were deferred and are being amortized over the expected life of the notes, which is five years.

Amortization of the debt issuance costs during the three ~~and nine~~ months ended ~~September 30,~~March 31, 2021 and 2020, totaled ~~$186,000~~$183,000 and ~~$428,000, respectively. Amortization of the debt issuance costs during the three and nine months ended September 30, 2019, totaled $109,000 and $326,000,~~$110,000, respectively. Amortization of the debt issuance costs is included in interest expense on subordinated notes in the consolidated statements of income, resulting in an imputed interest rate of ~~5.85%~~5.92%.

At ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019,~~2020, subordinated notes are summarized as follows:


					March 31, 2021		December 31, 2020
		September 30, 2020		December 31, 2019
		(In Thousands)

					(In Thousands)
Subordinated notes	$	150,000	$	75,000	$	150,000	$	150,000
Less: unamortized debt issuance costs		1,783		724		1,420		1,603
	$	148,217	$	74,276
					$	148,580	$	148,397

NOTE 14: INCOME TAXES

Reconciliations of the Company’s effective tax rates to the statutory corporate tax rates were as follows:

	Three Months Ended September 30,
	2020		2019


					Three Months Ended March 31,
					2021		2020
Tax at statutory rate	21.0	%	21.0	%	21.0	%	21.0	%
Nontaxable interest and dividends	(0.6	)	(0.5	)	(0.3)		(0.5)
Tax credits	(3.8	)	(3.9	)	(1.9)		(3.5)
State taxes	5.0		1.0		1.3		(1.7)
Other	(0.1	)	(0.1	)	0.9		0.3
	21.5	%	17.5	%
					21.0	%	15.6	%

Nine Months Ended September 30,

2020

2019

Tax at statutory rate
21.0
%

21.0
%
Nontaxable interest and dividends
(0.5
)

(0.5
)
Tax credits
(3.9
)

(4.2
)
State taxes
1.6

1.2

Other
0.6

0.1

18.8
%

17.6
%

The Company and its consolidated subsidiaries have not been audited recently by the Internal Revenue Service (IRS), except as described here. The Company, through one of its subsidiaries, is a partner in two partnerships which were under IRS examination for 2006 and 2007. As a result, the Company’s 2006 and subsequent tax years remained open for examination. The examinations of these partnerships were completed during 2019. The completion of these examinations did not result in significant changes to the Company’s tax positions.. As a result, federal tax years through December 31, ~~2015~~2016 are now closed.

The Company is currently under State of Missouri income and franchise tax examinations for its 2014 and 2015 tax years. The Company does not currently expect significant adjustments to its financial statements from ~~this~~these state ~~examination.~~examinations.

NOTE 15: DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS

ASC Topic 820, Fair Value Measurements, defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Topic 820 also specifies a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The standard describes three levels of inputs that may be used to measure fair value:

●

Quoted prices in active markets for identical assets or liabilities (Level 1): Inputs that are quoted unadjusted prices in active markets for identical assets that the Company has the ability to access at the measurement date. An active market for the asset is a market in which transactions for the asset or liability occur with sufficient frequency and volume to provide pricing information on an ongoing basis.

●

Other observable inputs (Level 2): Inputs that reflect the assumptions market participants would use in pricing the asset or liability developed based on market data obtained from sources independent of the reporting entity including quoted prices for similar assets, quoted prices for securities in inactive markets and inputs derived principally from or corroborated by observable market data by correlation or other means.

●

Significant unobservable inputs (Level 3): Inputs that reflect assumptions of a source independent of the reporting entity or the reporting entity’s own assumptions that are supported by little or no market activity or observable inputs.

·Quoted prices in active markets for identical assets or liabilities (Level 1): Inputs that are quoted unadjusted prices in active markets for identical assets that the Company has the ability to access at the measurement date. An active market for the asset is a market in which transactions for the asset or liability occur with sufficient frequency and volume to provide pricing information on an ongoing basis.

·Other observable inputs (Level 2): Inputs that reflect the assumptions market participants would use in pricing the asset or liability developed based on market data obtained from sources independent of the reporting entity including quoted prices for similar assets, quoted prices for securities in inactive markets and inputs derived principally from or corroborated by observable market data by correlation or other means.

·Significant unobservable inputs (Level 3): Inputs that reflect assumptions of a source independent of the reporting entity or the reporting entity's own assumptions that are supported by little or no market activity or observable inputs.

Financial instruments are broken down by recurring or nonrecurring measurement status. Recurring assets are initially measured at fair value and are required to be remeasured at fair value in the financial statements at each reporting date. Assets measured on a nonrecurring basis are assets that, due to an event or circumstance, were required to be remeasured at fair value after initial recognition in the financial statements at some time during the reporting period.

��

The Company considers transfers between the levels of the hierarchy to be recognized at the end of related reporting periods. From December 31, 2019 to September 30, 2020, no assets for which fair value is measured on a recurring basis transferred between any levels of the hierarchy.

Recurring Measurements

The following table presents the fair value measurements of assets recognized in the accompanying statements of financial condition measured at fair value on a recurring basis and the level within the fair value hierarchy in which the fair value measurements fell at ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019:~~ 2020:


													Fair value measurements using
													Quoted prices
													in active
													markets		Other		Significant
													for identical		observable		unobservable
													assets		inputs		inputs
											Fair value		(Level 1)		(Level 2)		(Level 3)
					Fair value measurements using
					Quoted prices
					in active
					markets		Other			Significant
					for identical		observable			unobservable
					assets		inputs			inputs
		Fair value			(Level 1)		(Level 2)			(Level 3)
		(In Thousands)

September 30, 2020
											(In Thousands)
March 31, 2021
Agency mortgage-backed securities	$	171,458		$	-	$	171,458		$	-	$	169,768	$	—	$	169,768	$	—
Agency collateralized mortgage obligations		185,091			-		185,091			-		227,082		—		227,082		—
States and political subdivisions		67,683			-		67,683			-
States and political subdivisions securities												41,230		—		41,230		—
Small Business Administration securities		21,708			-		21,708			-		19,588		—		19,588		—
Interest rate derivative asset		6,193			-		6,193			-		4,873		—		4,873		—
Interest rate derivative liability		(6,744	)		-		(6,744	)		-		(4,790)		—		(4,790)		—

December 31, 2019

December 31, 2020
Agency mortgage-backed securities	$	165,042		$	-	$	165,042		$	-	$	169,940	$	—	$	169,940	$	—
Agency collateralized mortgage obligations		151,950			-		151,950			-		176,621		—		176,621		—
States and political subdivisions		35,125			-		35,125			-
States and political subdivisions securities												47,325		—		47,325		—
Small Business Administration securities		22,058			-		22,058			-		21,047		—		21,047		—
Interest rate derivative asset		31,476			-		31,476			-		5,062		—		5,062		—
Interest rate derivative liability		(1,547	)		-		(1,547	)		-		(5,454)		—		(5,454)		—

The following is a description of inputs and valuation methodologies used for assets recorded at fair value on a recurring basis and recognized in the accompanying statements of financial condition at ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019,~~2020, as well as the general classification of such assets pursuant to the valuation hierarchy. There have been no significant changes in the valuation techniques during the ~~nine-month~~three-month period ended ~~September 30, 2020.~~March 31, 2021. For assets classified within Level 3 of the fair value hierarchy, the process used to develop the reported fair value is described below.

Available-for-Sale Securities. Investment securities available for sale are recorded at fair value on a recurring basis. The fair values used by the Company are obtained from an independent pricing service, which represent either quoted market prices for the identical asset or fair values determined by pricing models, or other model-based valuation techniques, that consider observable market data, such as interest rate volatilities, LIBOR yield curve, credit spreads and prices from market makers and live trading systems. Recurring Level 2 securities include U.S.

government agency securities, mortgage-backed securities, state and municipal bonds and certain other investments. Inputs used for valuing Level 2 securities include observable data that may include dealer quotes, benchmark yields, market spreads, live trading levels and market consensus prepayment speeds, among other things. Additional inputs include indicative values derived from the independent pricing service’s proprietary computerized models. There were no0 recurring Level 3 securities at ~~September 30, 2020~~March 31, 2021 or December 31, ~~2019.~~2020.

Interest Rate Derivatives. The fair value is estimated using forward-looking interest rate curves and is determined using observable market rates and, therefore, are classified within Level 2 of the valuation hierarchy.

Nonrecurring Measurements

The following ~~tables present~~table presents the fair value measurements of assets measured at fair value on a nonrecurring basis and the level within the fair value hierarchy in which the fair value measurements fall at ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019:~~2020:


											Fair Value Measurements Using
											Quoted prices
											in active
											markets		Other		Significant
											for identical		observable		unobservable
											assets		inputs		inputs
									Fair value		(Level 1)		(Level 2)		(Level 3)
				Fair Value Measurements Using
				Quoted prices
				in active
				markets		Other		Significant
				for identical		observable		unobservable
				assets		inputs		inputs
		Fair value		(Level 1)		(Level 2)		(Level 3)
		(In Thousands)

September 30, 2020
									(In Thousands)
March 31, 2021
Foreclosed assets held for sale									$	169	$	—	$	—	$	169

December 31, 2020
Impaired loans	$	3,447	$	-	$	-	$	3,447	$	1,759	$	—	$	—	$	1,759


Foreclosed assets held for sale	$	1,507	$	-	$	-	$	1,507	$	945	$	—	$	—	$	945

December 31, 2019
Impaired loans	$	635	$	-	$	-	$	635

Foreclosed assets held for sale	$	1,112	$	-	$	-	$	1,112

The following is a description of valuation methodologies used for assets measured at fair value on a nonrecurring basis and recognized in the accompanying statements of financial condition, as well as the general classification of such assets pursuant to the valuation hierarchy. For assets classified within Level 3 of the fair value hierarchy, the process used to develop the reported fair value is described below.

Loans Held for Sale.Mortgage loans held for sale are recorded at the lower of carrying value or fair value. The fair value of mortgage loans held for sale is based on what secondary markets are currently offering for portfolios with similar characteristics. As such, the Company classifies mortgage loans held for sale as Nonrecurring Level 2. Write-downs to fair value typically do not occur as the Company generally enters into commitments to sell individual mortgage loans at the time the loan is originated to reduce market risk. The Company typically does not have commercial loans held for sale. At ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019,~~2020, the aggregate fair value of mortgage loans held for sale exceeded their cost. Accordingly, no mortgage loans held for sale were marked down and reported at fair value.

Impaired ~~Loans.~~ ALoans. Prior to January 1, 2021, a loan iswas considered to be impaired when it iswas probable that all of the principal and interest due may not be collected according to its contractual terms. Generally, when a loan iswas considered impaired, the amount of reserve required under FASB ASC 310, Receivables, iswas measured based on the fair value of the underlying collateral. The Company ~~makes~~made such measurements on all material loans deemed impaired using the fair value of the collateral for collateral dependent loans. The fair value of collateral used by the Company iswas determined by obtaining an observable market price or by obtaining an appraised value from an independent, licensed or certified appraiser, using observable market data. This data ~~includes~~included information such as selling price of similar properties and capitalization rates of similar properties sold within the market, expected future cash flows or earnings of the

subject property based on current market expectations, and other relevant factors. All appraised values ~~are~~were adjusted for market-related trends based on the Company’s experience in sales and other appraisals of similar property types as well as estimated selling costs. Each quarter, management ~~reviews~~reviewed all collateral dependent impaired loans on a loan-by-loan basis to determine whether updated appraisals ~~are~~were necessary based on loan performance, collateral type and guarantor support. At times, the Company ~~measures~~measured the fair value of collateral dependent impaired loans using appraisals with dates more than one year prior to the date of review. These appraisals ~~are~~were discounted by applying current, observable market data about similar property types such as sales contracts, estimations of value by individuals familiar with the market, other appraisals, sales or collateral assessments based on current market activity until updated appraisals are obtained. Depending on the length of time since an appraisal was performed and the data provided through our reviews, these appraisals ~~are~~were typically discounted 10-40%. The policy described above iswas the same for all types of collateral dependent impaired loans.

Subsequent to December 31, 2020, these loans are no longer considered impaired.

The Company records ~~impaired~~collateral-dependent loans as Nonrecurring Level 3. If a loan’s fair value as estimated by the Company is less than its carrying value, the Company either records a charge-off of the portion of the loan that exceeds the fair value or establishes a reserve within the allowance for ~~loan~~credit losses specific to the loan. Loans for which such charge-offs or reserves were recorded during the ~~nine months ended September 30, 2020 or the~~ year ended December 31, ~~2019,~~2020, are shown in the table above (net of reserves).

Foreclosed Assets Held for Sale. Foreclosed assets held for sale are initially recorded at fair value less estimated cost to sell at the date of foreclosure. Subsequent to foreclosure, valuations are periodically performed by management and the assets are carried at the lower of carrying amount or fair value less estimated cost to sell. Foreclosed assets held for sale are classified within Level 3 of the fair value hierarchy. The foreclosed assets represented in the table above have been re-measured during the ~~nine~~three months ended ~~September 30, 2020~~March 31, 2021 or the year ended December 31, ~~2019,~~2020, subsequent to their initial transfer to foreclosed assets.

Fair Value of Financial Instruments

The following methods were used to estimate the fair value of all other financial instruments recognized in the accompanying statements of financial condition at amounts other than fair value.

Cash and Cash Equivalents and Federal Home Loan Bank Stock. The carrying amount approximates fair value.

Loans and Interest Receivable. The fair value of loans is estimated on an exit price basis incorporating contractual cash flows, prepayments, discount spreads, credit losses and liquidity premiums. Loans with similar characteristics were aggregated for purposes of the calculations. The carrying amount of accrued interest receivable approximates its fair value.

Deposits and Accrued Interest Payable. The fair value of demand deposits and savings accounts is the amount payable on demand at the reporting date, i.e., their carrying amounts. The fair value of fixed maturity certificates of deposit is estimated through a discounted cash flow calculation using the average advances yield curve from 11 districts of the FHLB for the as of date. The carrying amount of accrued interest payable approximates its fair value.

Short-Term Borrowings. The carrying amount approximates fair value.

Subordinated Debentures Issued to Capital Trusts. The subordinated debentures have floating rates that reset quarterly. The carrying amount of these debentures approximates their fair value.

Subordinated Notes. The fair values used by the Company are obtained from independent sources and are derived from quoted market prices of the Company’s subordinated notes and quoted market prices of other subordinated debt instruments with similar characteristics.

Commitments to Originate Loans, Letters of Credit and Lines of Credit. The fair value of commitments is estimated using the fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreements and the present creditworthiness of the counterparties. For fixed rate loan commitments, fair value also considers the difference between current levels of interest rates and the committed rates. The fair value of

letters of credit is based on fees currently charged for similar agreements or on the estimated cost to terminate them or otherwise settle the obligations with the counterparties at the reporting date.

The following table presents estimated fair values of the Company’s financial instruments not recorded at fair value on the statements of financial condition. The fair values of certain of these instruments were calculated by discounting expected cash flows, which method involves significant judgments by management and uncertainties. Fair value is the estimated amount at which financial assets or liabilities could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale. Because no market exists for certain of these financial instruments and because management does not intend to sell these financial instruments, the

Company does not know whether the fair values shown below represent values at which the respective financial instruments could be sold individually or in the aggregate.


											March 31, 2021						December 31, 2020
											Carrying		Fair		Hierarchy	Carrying		Fair		Hierarchy
											Amount		Value		Level	Amount		Value		Level
		September 30, 2020					December 31, 2019
		Carrying		Fair	Hierarchy		Carrying		Fair	Hierarchy
		Amount		Value	Level		Amount		Value	Level
		(In Thousands)

											(In Thousands)
Financial assets
Cash and cash equivalents	$	338,266	$	338,266	1	$	220,155	$	220,155	1	$	612,556	$	612,556	1	$	563,729	$	563,729	1
Mortgage loans held for sale		23,973		23,973	2		9,242		9,242	2		30,492		30,492	2		17,780		17,780	2
Loans, net of allowance for loan losses		4,413,764		4,422,175	3		4,153,982		4,129,984	3
Loans, net of allowance for credit losses												4,285,737		4,297,186	3		4,296,804		4,303,909	3
Interest receivable		14,139		14,139	3		13,530		13,530	3		13,027		13,027	3		12,793		12,793	3
Investment in FHLBank stock and other interest-earning assets		11,036		11,036	3		13,473		13,473	3		6,655		6,655	3		9,806		9,806	3


Financial liabilities
Deposits		4,443,757		4,454,083	3		3,960,106		3,963,875	3		4,626,936		4,631,388	3		4,516,903		4,523,586	3
Short-term borrowings		156,260		156,260	3		312,324		312,324	3		143,302		143,302	3		165,692		165,692	3
Subordinated debentures		25,774		25,774	3		25,774		25,774	3		25,774		25,774	3		25,774		25,774	3
Subordinated notes		148,217		153,844	2		74,276		76,875	2		148,580		157,125	2		148,397		157,032	2
Interest payable		2,859		2,859	3		4,250		4,250	3		2,444		2,444	3		2,594		2,594	3


Unrecognized financial instruments (net of contractual value)
Commitments to originate loans		-		-	3		-		-	3		—		—	3		—		—	3
Letters of credit		61		61	3		109		109	3		68		68	3		84		84	3
Lines of credit		-		-	3		-		-	3		—		—	3		—		—	3

NOTE 16: DERIVATIVES AND HEDGING ACTIVITIES

Risk Management Objective of Using Derivatives

The Company is exposed to certain risks arising from both its business operations and economic conditions. The Company principally manages its exposures to a wide variety of business and operational risks through management of its core business activities. The Company manages economic risks, including interest rate, liquidity and credit risk, primarily by managing the amount, sources and duration of its assets and liabilities. In the normal course of business, the Company may use derivative financial instruments (primarily interest rate swaps) from time to time to assist in its interest rate risk management. The Company has interest rate derivatives that result from a service provided to certain qualifying loan customers that are not used to manage interest rate risk in the Company’s assets or liabilities and are not designated in a qualifying hedging relationship. The Company manages a matched book with respect to its derivative instruments in order to minimize its net risk exposure resulting from such transactions. In addition, the Company has interest rate derivatives that are designated in a qualified hedging relationship.

Nondesignated Hedges

The Company has interest rate swaps that are not designated as qualifying hedging relationships. Derivatives not designated as hedges are not speculative and result from a service the Company provides to certain loan customers, which the Company began offering during 2011. The Company executes interest rate swaps with commercial banking customers to facilitate their respective risk management strategies. Those interest rate swaps are simultaneously hedged by offsetting interest rate swaps that the Company executes with a third party, such that the Company minimizes its net risk exposure resulting from such transactions. As the interest rate swaps associated with this program do not meet the strict hedge accounting requirements, changes in the fair value of both the customer swaps and the offsetting swaps are recognized directly in earnings.

As part of the Valley Bank FDIC-assisted acquisition, the Company acquired ~~seven~~7 loans with related interest rate swaps. Valley’s swap program differed from the Company’s in that Valley did not have back to back swaps with the customer and a counterparty. ~~Five~~NaN of the ~~seven~~7 acquired loans with interest rate swaps have paid off. The aggregate notional amount of the ~~two~~2 remaining Valley swaps was ~~$609,000~~$559,000 at ~~September 30, 2020.~~March 31, 2021. At ~~September 30, 2020,~~March 31, 2021, excluding the Valley Bank swaps, the Company had 1918 interest rate swaps totaling ~~$115.6~~$139.3 million in notional amount with commercial customers, and 1918 interest rate swaps with the same aggregate notional

amount with third parties related to its program. In addition, the Company has ~~four~~4 participation loans purchased totaling ~~$27.8~~$27.6 million, in which the lead institution has an interest rate swap with its customer and the economics of the counterparty swap are passed along to the Company through the loan participation. At December 31, ~~2019,~~2020, excluding the Valley Bank swaps, the Company had 19 interest rate swaps totaling ~~$96.0~~$142.8 million in notional amount with commercial customers, and 19 interest rate swaps with the same notional amount with third parties related to its program. During the three months ended ~~September 30,~~March 31, 2021 and 2020, ~~and 2019,~~ the Company recognized net gains of ~~$89,000~~$474,000 and net losses of $101,000, respectively, in noninterest income related to changes in the fair value of these swaps. During the nine months ended September 30, 2020 and 2019, the Company recognized net losses of $424,000 and $169,000,$407,000, respectively, in noninterest income related to changes in the fair value of these swaps.

Cash Flow Hedges

Interest Rate Swap. As a strategy to maintain acceptable levels of exposure to the risk of changes in future cash flows due to interest rate fluctuations, in October 2018, the Company entered into an interest rate swap transaction as part of its ongoing interest rate management strategies to hedge the risk of its floating rate loans. The notional amount of the swap was $400 million with a termination date of October 6, 2025. Under the terms of the swap, the Company received a fixed rate of interest of 3.018% and paid a floating rate of interest equal to one-month USD-LIBOR. The floating rate reset monthly and net settlements of interest due to/from the counterparty also occurred monthly. To the extent that the fixed rate of interest exceeded one-month USD-LIBOR, the Company received net interest settlements which were recorded as loan interest income. If USD-LIBOR exceeded the fixed rate of interest in future periods, the Company was required to pay net settlements to the counterparty and recorded those net payments as a reduction of interest income on loans. The Company recorded loan interest income of $2.0 million and ~~$801,000~~$1.6 million on this interest rate swap during the three months ended ~~September 30,~~March 31, 2021 and 2020, ~~and 2019, respectively. The Company recorded loan interest income of $5.6 million and $1.9 million on this interest rate swap during the nine months ended September 30, 2020 and 2019,~~ respectively. The effective portion of the gain or loss on the derivative is reported as a component of other comprehensive income and reclassified into earnings in the same period or periods during which the hedged transaction affected earnings. Gains and losses on the derivative representing either hedge ineffectiveness or hedge components excluded from the assessment of effectiveness are recognized in current earnings. During each of the three ~~and nine~~ months ended ~~September 30,~~March 31, 2021 and 2020, ~~and 2019,~~ the Company recognized no0 noninterest income related to changes in the fair value of this derivative.

On March 2, 2020, the Company and its swap counterparty mutually agreed to terminate the swap, effective ~~immediately.~~on that date. The Company received a payment of $45.9 million, including accrued but unpaid interest, from its swap counterparty as a result of this termination. This $45.9 million, less the accrued interest portion and net of deferred income taxes, iswas reflected in the Company’s stockholders’ equity as Accumulated Other Comprehensive Income and a portion of it is being accreted to interest income on loans monthly through the original contractual termination date of October 6, 2025. This ~~will have~~has the effect of reducing Accumulated Other Comprehensive Income and increasing Net Interest Income and Retained Earnings over the period. In each quarterly period, commencing with the quarter ended June 30, 2020, until the original contract termination date, the Company expects

to record loan interest income related to this swap transaction of approximately $2.0 million, based on the termination value of the swap. The Company currently expects to have an amount of eligible variable rate loans to continue to accrete this interest income in future periods. If this expectation changes and the amount of eligible variable rate loans decreases significantly, the Company may be required to recognize this interest income more rapidly.

The table below presents the fair value of the Company’s derivative financial instruments as well as their classification on the Consolidated Statements of Financial Condition:


						Location in		Fair Value
						Consolidated Statements		March 31,		December 31,
						of Financial Condition		2021		2020
	Location in		Fair Value
	Consolidated Statements		September 30,		December 31,
	of Financial Condition		2020		2019
			(In Thousands)
Derivatives designated as hedging instruments
Interest rate swap	Prepaid expenses and other assets	$	-	$	30,056

Total derivatives designated as hedging instruments		$	-	$	30,056

									(In Thousands)
Derivatives not designated as hedging instruments
Asset Derivatives
Interest rate products	Prepaid expenses and other assets	$	6,193	$	1,420		Prepaid expenses and other assets	$	4,873	$	5,062



Total derivatives not designated as hedging instruments		$	6,193	$	1,420			$	4,873	$	5,062


Liability Derivatives
Interest rate products	Accrued expenses and other liabilities	$	6,744	$	1,547		Accrued expenses and other liabilities	$	4,790	$	5,454


Total derivatives not designated as hedging instruments		$	6,744	$	1,547			$	4,790	$	5,454

The following table presents the effect of cash flow hedge accounting on the statements of comprehensive income:

		Amount of Gain (Loss)
		Recognized in AOCI
		Three Months Ended September 30,

						Amount of Gain (Loss)
						Recognized in AOCI
						Three Months Ended March 31,
Cash Flow Hedges		2020			2019	2021		2020
		(In Thousands)

							(In Thousands)
Interest rate swap, net of income taxes	$	(1,581	)	$	4,461	$	(1,546)	$	11,416

Amount of Gain (Loss)

Recognized in AOCI

Nine Months Ended September 30,
Cash Flow Hedges

2020

2019

(In Thousands)

Interest rate swap, net of income taxes
$
8,271

$
18,789

~~The~~he following table presents the effect of cash flow hedge accounting on the statements of income:


					Three Months Ended March 31,
Cash Flow Hedges					2021				2020
					Interest		Interest		Interest		Interest
					Income		Expense		Income		Expense
	Three Months Ended September 30,
Cash Flow Hedges	2020		2019
	Interest	Interest	Interest	Interest
	Income	Expense	Income	Expense
	(In Thousands)

					(In Thousands)
Interest rate swap	$ 2,047	$ -	$ 801	$ -	$	2,003	$	—	$	1,556	$	—

Nine Months Ended September 30,
Cash Flow Hedges
2020
2019

Interest
Interest
Interest
Interest

Income
Expense
Income
Expense

(In Thousands)
Interest rate swap
$        5,629
$             -
$        1,881
$              -

Agreements with Derivative Counterparties

The Company has agreements with its derivative counterparties. If the Company defaults on any of its indebtedness, including a default where repayment of the indebtedness has not been accelerated by the lender, then the Company could also be declared in default on its derivative obligations. If the Bank fails to maintain its status as a well-capitalized institution, then the counterparty could terminate the derivative positions and the Company would be required to settle its obligations under the agreements. Similarly, the Company could be required to settle its obligations under certain of its agreements if certain regulatory events occurred, such as the issuance of a formal directive, or if the Company’s credit rating is downgraded below a specified level.

At March 31, 2021, the termination value of derivatives with our derivative dealer counterparties (related to loan level swaps with commercial lending customers) in an overall net asset position, which included accrued interest but excluded any adjustment for nonperformance risk, related to these agreements was $375,000. The Company has minimum collateral posting thresholds with its derivative dealer counterparties. At March 31, 2021, the Company’s activity with one of its derivative counterparties met the level at which the minimum collateral posting thresholds take effect (collateral to be given by the Company) and the Company had posted collateral totaling $1.5 million to the derivative counterparties to satisfy the loan level agreements. At March 31, 2021, the Company’s activity with one of its derivative counterparties met the level at which the minimum collateral posting thresholds take effect (collateral to be received by the Company) and the derivative counterparties had posted collateral of $1.4 million to the Company to satisfy the loan level agreements. If the Company had breached any of these provisions at March 31, 2021 or December 31, 2020, it could have been required to settle its obligations under the agreements at the termination value.

At ~~September 30,~~December 31, 2020, the termination value of derivatives with our derivative dealer counterparties (related to loan level swaps with commercial lending customers) in a net liability position, which included accrued interest but excluded any adjustment for nonperformance risk, related to these agreements was ~~$6.7 million. The Company has minimum collateral posting thresholds with its derivative dealer counterparties. At September 30, 2020,~~$391,000. Additionally, the Company’s activity with two of its derivative counterparties met the level at which the minimum collateral posting thresholds take effect (collateral to be given by the Company) and the Company had posted collateral ~~totaling $6.7~~of $5.3 million to the derivative counterparties to satisfy the loan level agreements. ~~If the Company had breached any of these provisions at September 30, 2020 or December 31, 2019, it could have been required to settle its obligations under the agreements at the termination value.~~

At December 31, 2019, the termination value of derivatives with our derivative dealer counterparties (related to loan level swaps with commercial lending customers) in a net liability position, which included accrued interest but excluded any adjustment for nonperformance risk, related to these agreements was $1.1 million. In addition, as of December 31, 2019, the termination value of derivatives with our derivative dealer counterparty (related to the balance sheet hedge commenced in October 2018) in a net asset position, which included accrued interest but excluded any adjustment for nonperformance risk, related to these agreements was $30.1 million. The Company has minimum collateral posting thresholds with its derivative dealer counterparties. At December 31, 2019, the Company’s activity with one of its derivative counterparties met the level at which the minimum collateral posting thresholds take effect (collateral to be received by the Company) and the derivative counterparties had posted collateral of $30.9 million to the Company to satisfy the balance sheet hedge agreement. Additionally, the Company’s activity with one of its derivative counterparties met the level at which the minimum collateral posting thresholds take effect (collateral to be given by the Company) and the Company had posted collateral of $1.1 million to the derivative counterparties to satisfy the loan level agreements. If the Company had breached any of these provisions at December 31, 2019, it could have been required to settle its obligations under the agreements at the termination value.

ITEM 2. ~~MANAGEMENT'S~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Forward-looking Statements

When used in this Quarterly Report and in other documents filed or furnished by Great Southern Bancorp, Inc. (the “Company”) with the Securities and Exchange Commission (the ~~"SEC"~~“SEC”), in the ~~Company's~~Company’s press releases or other public or stockholder communications, and in oral statements made with the approval of an authorized executive officer, the words or phrases “may,” “might,” “could,” “should,” ~~"will~~“will likely result,~~" "are~~” “are expected to,~~" "will~~” “will continue,~~" "is~~” “is anticipated,"” “believe,” ~~"estimate," "project," "intends"~~“estimate,” “project,” “intends” or similar expressions are intended to identify ~~"forward-looking statements"~~“forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements also include, but are not limited to, statements regarding plans, objectives, expectations or consequences of announced transactions, known trends and statements about future performance, operations, products and services of the Company. The Company’s ability to predict results or the actual effects of future plans or strategies is inherently uncertain, and the Company’s actual results could differ materially from those contained in the forward-looking statements. The novel coronavirus disease, or COVID-19, pandemic is adversely affecting the Company, its customers, counterparties, employees, and third-party service providers, and the ultimate extent of the impacts on the Company’s business, financial position, results of operations, liquidity, and prospects is uncertain. Continued deterioration in general business and economic conditions, including further increases in unemployment rates, or turbulence in domestic or global financial markets could adversely affect the Company’s revenues and the values of its assets and liabilities, reduce the availability of funding, lead to a tightening of credit, and further increase stock price volatility. In addition, changes to statutes, regulations, or regulatory policies or practices as a result of, or in response to, COVID-19, could affect the Company in substantial and unpredictable ways.

Other factors that could cause or contribute to such differences include, but are not limited to: (i) expected revenues, cost savings, earnings accretion, synergies and other benefits from the ~~Company's~~Company’s merger and acquisition activities might not be realized within the anticipated time frames or at all, and costs or difficulties relating to integration matters, including but not limited to customer and employee retention, might be greater than expected; (ii) changes in economic conditions, either nationally or in the ~~Company's~~Company’s market areas; (iii) fluctuations in interest rates; (iv) the risks of lending and investing activities, including changes in the level and direction of loan delinquencies and write-offs and changes in estimates of the adequacy of the allowance for ~~loan~~credit losses; (v) the possibility of other-than-temporary impairments of securities held in the ~~Company's~~Company’s securities portfolio; (vi) the ~~Company's~~Company’s ability to access cost-effective funding; (vii) fluctuations in real estate values and both residential and commercial real estate market conditions; (viii) the ability to adapt successfully to technological changes to meet ~~customers'~~customers’ needs and developments in the marketplace; (ix) the possibility that security measures implemented might not be sufficient to mitigate the risk of a cyber-attack or cyber theft, and that such security measures might not protect against systems failures or interruptions; (x) legislative or regulatory changes that adversely affect the ~~Company's~~Company’s business, including, without limitation, the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 and its implementing regulations, the overdraft protection regulations and ~~customers'~~customers’ responses thereto and the Tax Cut and Jobs Act; (xi) changes in accounting policies and practices or accounting standards, including Accounting Standards Update 2016-13, Credit Losses (Topic 326), “Measurement of Credit Losses on Financial Instruments,” commonly referenced as the Current Expected Credit Loss model, which, upon adoption, is expected to result in an increase in the Company’s allowance for credit losses;standards; (xii) monetary and fiscal policies of the Federal Reserve Board and the U.S. Government and other governmental initiatives affecting the financial services industry; (xiii) results of examinations of the Company and Great Southern Bank by their regulators, including the possibility that the regulators may, among other things, require the Company to limit its business activities, change its business mix, increase its allowance for ~~loan~~credit losses, write-down assets or increase its capital levels, or affect its ability to borrow funds or maintain or increase deposits, which could adversely affect its liquidity and earnings; (xiv) costs and effects of litigation, including settlements and judgments; (xv) competition; (xvi) uncertainty regarding the future of LIBOR; and (xvii) natural disasters, war, terrorist activities or civil unrest and their effects on economic and business environments in which the Company operates. The Company wishes to advise readers that the factors listed above and other risks described from time to time in documents filed or furnished by the Company with the SEC could affect the ~~Company's~~Company’s financial performance and could cause the ~~Company's~~Company’s actual results for future periods to differ materially from any opinions or statements expressed with respect to future periods in any current statements.

The Company does not undertake-and specifically declines any obligation- to publicly release the result of any revisions which may be made to any forward-looking statements to reflect events or circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated events.

Critical Accounting Policies, Judgments and Estimates

The accounting and reporting policies of the Company conform to accounting principles generally accepted in the United States of America and general practices within the financial services industry. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions

that affect the amounts reported in the financial statements and the accompanying notes. Actual results could differ from those estimates.

Allowance for ~~Loan~~Credit Losses and Valuation of Foreclosed Assets

The Company believes that the determination of the allowance for ~~loan~~credit losses involves a higher degree of judgment and complexity than its other significant accounting policies. The allowance for ~~loan~~credit losses is calculated with the objective of maintaining an allowance level believed by management to be sufficient to absorb estimated ~~loan~~credit losses. ~~Management's determination~~The allowance for credit losses is measured using an average historical loss model which incorporates relevant information about past events (including historical credit loss experience on loans with similar risk characteristics), current conditions, and reasonable and supportable forecasts that affect the collectability of the ~~adequacy~~remaining cash flows over the contractual term of the loans. The allowance for credit losses is measured on a collective (pool) basis. Loans are aggregated into pools based on ~~periodic evaluations~~similar risk characteristics including borrower type, collateral and repayment types and expected credit loss patterns. Loans that do not share similar risk characteristics, primarily classified and/or TDR loans with a balance greater than or equal to $100,000 which are classified or restructured troubled debt, are evaluated on an individual basis.

rate is augmented by industry and peer data. The ~~process also~~calculated average net charge-off rate is then adjusted for current conditions and reasonable and supportable forecasts. These adjustments increase or decrease the average historical loss rate to reflect expectations of future losses given economic forecasts of key macroeconomic variables including, but not limited to, unemployment rate, GDP, disposable income and market volatility. The adjustments are based on results from various regression models projecting the impact of the macroeconomic variables to loss rates. The forecast is used for a reasonable and supportable period before reverting back to historical averages using a straight-line method. The forecast adjusted loss rate is applied to the amortized cost of loans over the remaining contractual lives, adjusted for expected prepayments. The contractual term excludes expected extensions, renewals and modifications unless there is a reasonable expectation that a troubled debt restructuring will be executed. Additionally, the allowance for credit losses considers ~~economic conditions, uncertainties~~other qualitative factors not included in ~~estimating losses and inherent risks~~historical loss rates or macroeconomic forecast such as changes in ~~the loan portfolio. All of these factors may be susceptible to~~portfolio composition, underwriting practices, or significant change. To the extent actual outcomes differ from management estimates, additional provisions for loan losses may be required which would adversely impact earnings in future periods. In addition, the Bank’s regulators could require additional provisions for loan losses as part of their examination process.

unique events or conditions.

See Note 6 “Loans and Allowance for ~~Loan~~Credit Losses” included in Item 1 for additional information regarding the allowance for ~~loan~~credit losses. Inherent in this process is the evaluation of individual significant credit relationships. From time to time certain credit relationships may deteriorate due to payment performance, cash flow of the borrower, value of collateral, or other factors. In these instances, management may revise its loss estimates and assumptions for these specific credits due to changing circumstances. In some cases, additional losses may be realized; in other instances, the factors that led to the deterioration may improve or the credit may be refinanced elsewhere and allocated allowances may be released from the particular credit. ~~The Company uses a three-year average of historical losses for the general component of the allowance for loan loss calculation. No significant~~Significant changes were made to ~~management's~~management’s overall methodology for evaluating the allowance for ~~loan~~credit losses during the periods presented in the financial statements of this ~~report.~~report due to the adoption of ASU 2016-13.

On January 1, 2021, the Company adopted the new accounting standard related to the Allowance for Credit Losses. For assets held at amortized cost basis, this standard eliminates the probable initial recognition threshold in current GAAP and, instead, requires an entity to reflect its current estimate of all expected credit losses. See Note 6 of the accompanying financial statements for additional information.

In addition, the Company considers that the determination of the valuations of foreclosed assets held for sale involves a high degree of judgment and complexity. The carrying value of foreclosed assets reflects management’s best estimate of the amount to be realized from the sales of the assets. While the estimate is generally based on a valuation by an independent appraiser or recent sales of similar properties, the amount that the Company realizes from the sales of the assets could differ materially from the carrying value reflected in the financial statements, resulting in losses that could adversely impact earnings in future periods.

~~Carrying Value of Loans Acquired in FDIC-Assisted Transactions~~

The Company considers that the determination of the carrying value of loans acquired in the FDIC-assisted transactions involves a high degree of judgment and complexity. The carrying value of the acquired loans reflects management’s best ongoing estimates of the amounts to be realized on these assets. The Company determined initial fair value accounting estimates of the acquired assets and assumed liabilities in accordance with FASB ASC 805, ~~Business Combinations~~~~. However, the amount that the Company realizes on its acquired loan assets could differ~~

materially from the carrying value reflected in its financial statements, based upon the timing of collections on the acquired loans in future periods. Because of the loss sharing agreements with the FDIC on certain of these assets, the Company did not expect to incur any significant losses related to these assets. Subsequent to the initial valuation, the Company continued to monitor identified loan pools for changes in estimated cash flows projected for the loan pools, anticipated credit losses and changes in the accretable yield. Analysis of these variables requires significant estimates and a high degree of judgment. See ~~Note 7~~ ~~“FDIC-Assisted Acquired Loans” included in Item 1 for additional information regarding the TeamBank, Vantus Bank, Sun Security Bank, InterBank and Valley Bank FDIC-assisted transactions.~~

Goodwill and Intangible Assets

Goodwill and intangible assets that have indefinite useful lives are subject to an impairment test at least annually and more frequently if circumstances indicate their value may not be recoverable. Goodwill is tested for impairment using a process that estimates the fair value of each of the Company’s reporting units compared with its carrying value. The Company defines reporting units as a level below each of its operating segments for which there is discrete financial information that is regularly reviewed. As of ~~September 30, 2020,~~March 31, 2021, the Company had one reporting unit to which goodwill has been allocated – the Bank. If the fair value of a reporting unit exceeds its carrying value, then no impairment is recorded. If the carrying value exceeds the fair value of a reporting unit, further testing is completed comparing the implied fair value of the reporting unit’s goodwill to its carrying value to measure the amount of impairment, if any. Intangible assets that are not amortized ~~must~~will be tested for impairment at least annually by comparing the fair values of those assets to their carrying values. At ~~September 30, 2020,~~March 31, 2021, goodwill consisted of $5.4 million at the Bank reporting unit, which included goodwill of $4.2 million that was recorded during 2016 related to the acquisition of 12 branches ~~from Fifth Third Bank.~~and related deposits in the St. Louis, Mo., market. Other identifiable intangible assets that are subject to amortization are amortized on a straight-line basis over a period of seven years. At ~~September 30, 2020,~~March 31, 2021, the amortizable intangible assets consisted of core deposit intangibles of ~~$1.8~~$1.3 million, which are reflected in the table below. These amortizable intangible assets are reviewed for impairment if circumstances indicate their value may not be recoverable based on a comparison of fair value.

~~Our regular annual~~For purposes of testing goodwill for impairment, ~~assessment occurs in the third quarter of each year. At September 30, 2020,~~ the Company ~~performed this annual review, including consideration of~~used a market approach to value its reporting unit. The market approach applies a market multiple, based on observed purchase transactions for each reporting unit, to the ~~current circumstances brought about by the COVID-19 pandemic and its effect on~~metrics appropriate for the valuation of the ~~Company~~operating unit. Significant judgment is applied when goodwill is assessed for impairment. This judgment may include developing cash flow projections, selecting appropriate discount rates, identifying relevant market comparables and ~~other bank holding companies. The Company concluded that no~~incorporating general economic and market conditions.

Based on the Company’s goodwill impairment testing, management does not believe any of ~~its goodwill and intangible assets had occurred at September 30, 2020. While~~ the ~~Company believes no impairment of its~~Company’s goodwill or other intangible assets were impaired as of March 31, 2021. While management believes no impairment existed at ~~September 30, 2020,~~March 31, 2021, different conditions or assumptions used to measure fair value of the reporting ~~units,~~unit, or changes in cash flows or profitability, if significantly negative or unfavorable, could have a material adverse effect on the outcome of the Company’s impairment evaluation in the future.

A summary of goodwill and intangible assets is as follows:


	March 31,		December 31,
	2021		2020

	(In Thousands)

Goodwill – Branch acquisitions	$	5,396	$	5,396
Deposit intangibles
Boulevard Bank (March 2014)		—		31
Valley Bank (June 2014)		100		200
Fifth Third Bank (January 2016)		1,159		1,317
		1,259		1,548
	$	6,655	$	6,944

September 30,
2020

December 31,
2019

(In Thousands)

Goodwill – Branch acquisitions
$
5,396

$
5,396
Deposit intangibles

Boulevard Bank

61

153
Valley Bank

300

600
Fifth Third Bank

1,475

1,949

1,836

2,702

$
7,232

$
8,098

Current Economic Conditions

Changes in economic conditions could cause the ~~value~~values of assets and liabilities recorded in the financial statements to change rapidly, resulting in material future adjustments in asset values, the allowance for ~~loan~~credit losses, or capital that could negatively impact the Company’s ability to meet regulatory capital requirements and maintain sufficient liquidity.

Following the housing and mortgage crisis and correction beginning in mid-2007, the United States entered an economic downturn. Unemployment rose from 4.7% in November 2007 to peak at 10.0% in October 2009. ~~Since that time, economic~~Economic conditions improved ~~considerably,~~in the following years, as indicated by higher consumer confidence levels, increased economic activity and low unemployment levels. The U.S. economy continued to operate at historically strong levels until the impact of ~~the~~ COVID-19 ~~pandemic~~began to take its toll in March 2020. While U.S. economic trends have rebounded, the severity and extent of the ~~COVID-19 pandemic~~coronavirus on the global, national and regional economies is still uncertain.

The economy plunged into recession during the first quarter of 2020. Efforts to contain the spread of the coronavirus forced all but essential business activity, or any work that could not be done from home, to stop, shuttering factories, restaurants, entertainment and sports events, retail shops, personal services, and more.

More than 22 million jobs were lost in March and April of 2020, as firms closed their doors or reduced their operations, sending employees home on furlough or layoffs. Hunkered down at home with uncertain ~~it will most likely~~incomes and limited buying opportunities, consumer spending plummeted. As a result, gross domestic product (GDP), the broadest measure of the nation’s economic output, plunged. Since that time, improvements in consumer spending, the GDP and employment have occurred. The CARES Act, a ~~temporary detrimental impact~~fiscal relief bill passed by Congress in March 2020, injected about $3 trillion into the economy through direct payments to individuals and grants to small businesses that would keep employees on their payrolls, fueling a historic bounce-back in economic activity.

Also, as the ~~performance~~crisis unfolded, the Federal Reserve acted decisively, employing a wide arsenal of ~~our loan portfolio. Short-term modifications on loan terms~~tools including slashing its benchmark interest rate to zero and ensuring credit availability to businesses, households, and municipal governments. The Fed’s efforts have insulated the financial system from the problems in the economy, a significant difference than the financial crisis of 2007 and 2008. The Federal Reserve continues to maintain a highly accommodative monetary policy by maintaining short-term rates firmly at the zero lower bound and purchasing Treasury and agency mortgage-backed securities to keep long-term interest rates down. With consumer interest rates at record lows and with 30-year fixed-rate mortgages below 3%, the housing market has boomed. Home sales have been above their pre-pandemic levels, and construction activity has picked up in response.

The Federal Reserve’s quantitative easing is expected to begin tapering in early 2022, while the zero-interest-rate policy is expected to remain in place until the economy is near full employment and inflation is firmly above the Federal Reserve’s 2% inflation target, which is not expected until early 2023.

To help our customers navigate through the ~~current~~ pandemic situation, we offered and supplied PPP loans and short-term modifications to loan terms. PPP loans and modifications were made in accordance with guidance from ~~the~~ banking regulatory authorities. These modifications ~~did~~were not ~~result in these loans being~~ classified as troubled debt restructurings, potential problem loans or non-performing loans. More severely impacted industries in our loan portfolio ~~include~~included retail, ~~motel/~~hotel and restaurants.

While the U.S. economic recovery began with a robust rebound in mid to late 2020 from the pandemic-induced recession, challenges remain with millions still out of work and many businesses still closed or operating under reduced hours or capacity. Vaccine distribution has enabled an easing of capacity and social distancing restrictions; however, COVID variants and the impact of ability of global and localized ability to control the virus are still variables.

AsEarly in 2021, the “American Rescue Plan”, an economic relief fiscal measure of ~~September 2020,~~approximately $1.9 trillion with an emphasis on vaccination, individual and small business relief, was passed. Later in 2021, the “Build Back Better” recovery package is expected to be pursued with an emphasis on infrastructure, research and development, education and green energy transition. Funding is expected to come at least partially from corporate tax changes and tax increases on wealthy individuals.

In March 2021, employment rose by 916,000 jobs and the national unemployment rate ~~declined by a 0.5~~edged down to 6.0%. The rate is down considerably from its recent high in April 2020 but is 2.5 percentage ~~point over the month to 7.9%, but was 4.4~~ points higher than its pre-pandemic level in ~~September 2019. Improvements~~February 2020.These improvements in the labor market reflect the continued resumption of economic activity ~~that had been~~previously curtailed due to the COVID-19 ~~pandemic and efforts to contain it. During September, more significant~~pandemic. The recent widespread job growth was led by gains ~~occurred~~ in leisure and hospitality, ~~retail trade, health care~~public and ~~social assistance,~~private education, and ~~professional and business services.~~construction. Employment in ~~government declined over the month, mainly~~leisure and hospitality increased by 280,000, as pandemic-related restrictions eased in ~~state and local government education. Unemployment rates will be volatile and dependent upon the containment~~many parts of the ~~COVID-19 virus.~~country, but is still down by 3.1 million (18.5%) since February 2020. Nearly two-thirds of the increase was in food services and drinking places (176 million). Employment also increased in both public and private education, reflecting the continued resumption of in-person learning and other school-related activities in many parts of the country, as well as in the construction sector; however, the employment rates in these industries are still below the February 2020 levels. The number of unemployed persons at 9.7 million continued to trend down in March 2020 but is 4.0 million higher than February 2020.

In March 2021, the U.S. labor force participation rate (the share of working-age Americans employed or actively looking for a job) was 1.8 percentage points lower, at 61.5% than in February 2020 pre-COVID levels.

The unemployment rate for the Midwest, where the Company conducts most of its business, decreased from ~~11.0%~~5.7% in ~~June~~December 2020 to ~~7.2%~~4.8% in ~~September 2020.~~March 2021. Unemployment rates for ~~September 2020~~March 2021 were Arkansas at ~~7.3%~~4.4%, Colorado at 6.4%, Georgia at ~~6.4%~~4.5%, Illinois at ~~10.2%~~7.1%, Iowa at ~~4.7%~~3.7%, Kansas at ~~5.9%~~3.7%, Minnesota at ~~6.0%~~4.2%, Missouri at ~~4.9%~~4.2%, Nebraska at ~~3.5%~~2.9%, Oklahoma at ~~5.3%~~4.2%, and Texas at ~~8.3%~~6.9%. ~~Since August 2019, the Chicago area had a decrease of 366,600 jobs, ending with an unemployment rate of 11.5% as of September 2020 making them the highest unemployment rate among~~Of the metropolitan areas in which the Company does ~~business. While~~business, all ~~of the company’s metropolitan areas had an increase in unemployment due to the ongoing pandemic, other than Chicago, the remaining areas are equal to or~~but three were below the ~~National~~national unemployment rate of ~~7.9%.~~6.6% for February 2021. Chicago leads with an 8.3% unemployment rate, with Denver and Dallas following at 6.9% and 6.8% respectfully.

Housing

Sales of ~~newly built~~new single-family homes ~~for September 2020~~in March 2021 were at a seasonally adjusted annual rate of ~~959,000~~1,021,000 according to U.S. Census Bureau and the Department of Housing and Urban Development estimates. This is ~~3.5% below~~20.7% above the revised ~~August~~February 2020 rate of ~~994,000, but~~846,000 and is ~~32.1~~66.8 percent above the ~~September 2019~~March 2020 estimate of ~~726,000.~~612,000. The median sales price of new houses sold in ~~September 2020~~March 2021 was ~~$326,800~~$330,800, up slightly from ~~$299,400~~$321,400 a year ~~earlier. The September 2020~~earlier, and the average sales price of ~~$405,400~~$397,800 was up slightly from ~~$362,700~~$375,300 a year ~~ago.~~ago in March 2020. The inventory of new homes for sale at the end of ~~September~~March 2021 would support 3.6 months’ supply at the current sales ~~pace,~~rate, down from ~~5.5~~6.4 months in ~~September 2019.~~

March 2020.

Existing-home sales ~~grew for~~fell 3.7% in March 2021 from the ~~fourth consecutive~~prior month to a seasonally adjusted annual rate of 6.01 million as sales in ~~September, showing strong signs of a market turnaround after three straight months of sales declines caused by the ongoing pandemic,~~all major regions declined, according to the National Association of Realtors (NAR)~~. For four straight~~, marking two consecutive months of declines. March 2021 sales are higher by 12.3% from one year ago when home sales ~~have grown in every region compared~~first started to fall due to the ~~previous month. Existing-home sales grew 7.1%~~pandemic, making record-high home prices and gains. While each of the four major U.S. regions experienced month-over-month drops, all four areas welcomed year-over-year gains in ~~the Midwest to an annual rate of 1.5 million in September 2020 up 19.8% from a year ago. Total existing~~ home sales reached a seasonally adjusted rate of 6.5 million in September 2020. Total housing inventory at the end of September 2020 totaled 1.47 million units, down 1.3% from August and down 1.82 million, or 19.2%, from the previous year period. Unsold inventory sits at a 2.7 months’ supply at the current sale pace, down from 3.0 months in August and down from 4.0 months in September 2019.

sales.

The median existing home price for all housing types in ~~September~~March 2021 was $329,100, up 17.2% from March 2020 ~~was $311,800, up 14.8% from a year ago. This~~at $280,700, as prices increased in every region. March’s national price ~~increase~~jump marks the ~~103rd~~109th straight month of year-over-year gains. ~~Median~~Existing home ~~prices increased at double-digit rates~~sales in ~~each~~the Midwest declined 2.3% to an annual rate of ~~the four major regions~~1,280,000 in March 2021, a 0.8% rise from ~~one~~a year ago. The ~~median~~Median price in the Midwest was ~~$243,100,~~$248,200, a ~~14.8%~~13.5% increase from ~~September 2019.~~March 2020. First-time buyers accounted for ~~31%~~32% of sales in ~~September,~~March 2021, up from 31% in February 2021 and down from ~~33%~~34% in ~~both August 2020 and September 2019.~~March 2020.

According to Freddie Mac, the average commitment rate for a 30-year, conventional, fixed-rate mortgage ~~dropped to 2.88%, down~~was 3.08% in March 2021, up from ~~3.13%~~2.81% in ~~June 2020.~~February 2021. The average commitment rate for all of ~~2019~~2020 was ~~3.94%~~3.11%, down ~~slightly~~ from 4.54% for 2018.

Commercial Real Estate Other Than Housing

The ~~effects of the~~ COVID-19 pandemic ~~on real estate markets appeared~~upended the U.S. apartment sector in ~~CoStar's multifamily data with daily asking rents for apartment units declining since March 11, just as the prime leasing season began to unfold. After flattening~~2020, resulting in May, rents began to rebound in June as cities nationwide worked to reopen their economies and the national job market continued to show signs of recovering. However, U.S apartment rents have trended lower since July, led by ongoing declines in downtown rents. During the pandemic, changes inchanging attitudes regarding working from ~~home~~home. Renters have ~~changed with renters seeking~~sought more space and affordability; i.e. rents for two-bedroom units have held up better, ~~while~~with studios ~~have experienced~~and downtown units experiencing the worst losses. ~~Net absorption surged to more than~~

CoStar estimates that demand for apartments neared the seasonal average totaling roughly 100,000 units in the ~~third~~first quarter ~~indicating pent-up demand for new apartments still exists. With the stimulus package behind us and eviction leniency periods ending, unemployment will~~of 2021. Renters continue to ~~determine~~favor suburban locations, where demand continues to hit record levels and vacancies have fallen below pre-COVID lows. Demand at downtown locations has returned, however, with vacancy rates appearing to have peaked. Apartment rents rebounded in March 2021 with rents rising a full percentage point. If the ~~long-term outlook~~level of growth so far in 2021 continues, this will effectively make up for ~~apartment demand.~~

the rent losses of 2020 and put rent growth back on the pre-COVID trajectory. Downtown areas in secondary markets are posting the largest gains this year thus far.Multifamily assets remain in demand among investors.

As of ~~the end of September 2020,~~March 31, 2021, national apartment vacancy rates ~~stood~~had recovered to pre-COVID levels at 6.4% compared to 6.2% as of December 2019. Our market areas reflected the following vacancy levels as of March 31, 2021: Springfield, Mo. at 2.9%, St. Louis at 8.4%, Kansas City at 8.3%, Minneapolis at 7.2%, Tulsa, Okla. at 6.8%, Dallas-Fort Worth at 8.5%, Chicago at 7.8%, Atlanta at 7.7%, and Denver at 7.0%.

Even before the disruption caused by the COVID-19 pandemic, the trend of slowing growth in the office industry was expected to continue in 2020 and linger through 2021. The office demand losses that characterized much of last year have carried into 2021. Office-using employment remained nearly one million jobs lower than the peak level from the first quarter of 2020. Absorption posted its worst quarter on record as tenants continue to downsize and adopt hybrid work models. While office-using job sectors have shown resilience, the office sector has about 800,000 fewer office jobs than the peak at the start of 2020. The current baseline forecast shows a steady, moderate acceleration with office-using job totals surpassing the prior peak by the end of this year; however, overall projected job growth may no longer closely correlate to office demand.

At March 31, 2021, national office vacancy rates had increased slightly to 12.1% while our market areas reflected the following vacancy levels: Springfield, Mo. at ~~4.6%~~3.2%, St. Louis at ~~8.9%~~8.2%, Kansas City at ~~7.9%~~9.2%, Minneapolis at ~~6.2%~~9.4%, Tulsa, Okla. at ~~7.3%~~11.8%, Dallas-Fort Worth at ~~8.4%~~18.0%, Chicago at ~~8.0%~~14.0%, Atlanta at ~~8.7%~~13.8% and Denver at ~~7.7%~~13.7%.

Retail sales activity surged in the first quarter of 2021, as focus on coordinated vaccine distribution and supporting strong consumer confidence bolstered leasing activity and overall economic growth. While e-commerce continues to expand, consumers have continued to visit physical stores for both their basic needs and discretionary purchases. Pockets of strength in the retail industry include discounters such as Dollar General, Dollar Tree, TJ Maxx, and Ross Dress for Less; general merchandisers such as Target and Walmart; pharmacies such as Walgreens; pet stores; and home improvement/tool retailers.

~~Commercial Real Estate Other Than Housing~~While these essential-oriented tenant types remain a positive source of demand, several areas of the retail sector remain under financial strain. Ongoing capacity restraints for service-oriented retailers such as restaurants, together with reduced foot traffic for various indoor malls and retailer, continues to contribute to both bankruptcies and store closure announcements particularly concentrated throughout the restaurant, apparel and department store subtypes. High-quality properties with strong tenant mixes and essential-oriented anchors, in central location and growing demographics continue to trade.

At March 31, 2021, national retail vacancy rates stayed the same at 5.1% while our market areas reflected the following vacancy levels: Springfield, Mo. at 3.7%, St. Louis at 4.9%, Kansas City at 5.7%, Minneapolis at 3.7%, Tulsa, Okla. at 3.7%, Dallas-Fort Worth at 6.2%, Chicago at 6.1%, Atlanta at 5.4% and Denver at 5.3%.

The ~~full impact of the coronavirus outbreak~~unprecedented rise in online shopping and quick delivery demands brought on the U.S. Office sector remains unclear, but per CoStar, demand for office space declined steeply in the third quarter, tripling the losses posted in the second quarter. As the pandemic continues to flare in areas, many companies have extended work from home protocols till mid-2021. Co-Star’s baseline forecast calls for office-using employment totals to return to pre-pandemic levels by the end of 2022, and continue to moderately accelerate from there. Annual rent growth has been slowing over the past several quarters and was flat in the third quarter. Even before the disruption caused by the pandemic ~~the trend of slowing growth was expected~~have propelled industrial demand to ~~continue~~all-time highs.

Leasing activity in ~~2020 and lingering through 2021.~~

The retail sector of commercial real estate remains one of the most vulnerable to the impact of the COVID-19 pandemic. Gradual store re-openings throughout the nation and the relaxation of social distancing restrictions has modestly lifted consumer confidence and given hope for stabilization in the industry throughout the remainder of 2020. However, increasing infection rates throughout many mid-western and Southern states threat the continued path to stability producing additional certainty for retailers already struggling with reduced revenues and limited liquidity. Decline in sales of soft-good department stores, retail shops and restaurants, those believed to be the most hurt by the pandemic, will affect malls, strip centers and outlet centers by subsequent increase in vacancies. The wave of retail bankruptcies is expected to continue; however, tenants with essential-oriented offerings have thus far weathered the storm and arisen as a modest source of positive demand.

~~Though~~ the industrial sector ~~may fare best among commercial real estate sectors, its operating fundamentals will not fully escape~~improved throughout the ~~negative impacts~~first quarter of ~~the COVID-19 recession. Dampened aggregate demand~~2021, primarily led by commitments from Amazon, power-grocers Walmart and ~~reduced export growth along with disrupted~~Target, smaller healthcare and ~~curtailed~~medical-oriented supply ~~chains present a headwind for port markets~~companies, food and ~~industrial distribution operators. Meanwhile, labor shortages arising from mandatory construction suspensions place further pressure on industrial operators, distributors~~beverage producers and manufacturers. ~~Negative factors in~~

Strong demand from a wide variety of business types and segments was enough to offset new supply and decrease vacancy rates. Persistent demand from e-commerce and third-party logistics (3PLs) companies continues to drive demand. Investors continue to aggressively pursue industrial acquisitions.

At March 31, 2021, national industrial vacancy rates decreased slightly to 5.5% while our market areas reflected the ~~industry are countered somewhat with the increased activity of large tenant groups including Amazon, third party logistics providers~~following vacancy levels: Springfield, Mo. at 2.1%, St. Louis at 4.6%, Kansas City at 5.2%, Minneapolis at 4.0%, Tulsa, Okla. at 3.9%, Dallas-Fort Worth at 6.9%, Chicago at 6.2%, Atlanta at 4.7% and ~~larger retailers.~~ Denver at 6.9%.

Under CoStar’s base case forecast, the moderation in demand, taking into consideration a considerable development pipeline, may result in a vacancy rate in the mid 6% range, which is still well below the peak of 10.6% reached during the Great Recession.

The degree to which the commercial real estate sector suffers is yet unknown, as the path and progression of the pandemic, and the economy's response to such measures taken remains fluid. In addition to forced and voluntary store closures, many retailers will struggle amid near-total loss of foot traffic, declining consumer sentiment, lost wages and restrained consumer spending activity.

Our management will continue to monitor regional, national, and global economic indicators such as unemployment, GDP, housing starts and prices, commercial real estate occupancy, absorption and rental rates, as these could significantly affect customers in each of our market areas.

COVID-19 Impact to Our Business and Response

Great Southern is actively monitoring and responding to the effects of the ~~rapidly-changing~~ COVID-19 ~~pandemic.~~pandemic, including the administration of vaccines in its local markets. As always, the health, safety and well-being of our customers, associates and communities, while maintaining uninterrupted service, are the Company’s top priorities. Centers for Disease Control and Prevention (CDC) guidelines, as well as directives from federal, state and local officials, are being closely followed to make informed operational decisions. ~~A summary of the Company’s major COVID-19 responses and actions are highlighted below.~~

~~Great Southern Associates: During this unprecedented time, the~~The Company ~~is working~~continues to work diligently with its nearly 1,200 associates to enforce ~~CDC-advised~~the most current health, hygiene and social distancing practices. A significant number of non-frontline associates continue to work from home. Teams in nearly every operational department have been split, with part of each team working at an off-site disaster recovery facility to promote social distancing and to avoid service disruptions. To date, there have been no service disruptions or reductions in staffing.

~~Paid time off and~~ With the advent of COVID-19 vaccinations in the Company’s markets, plans are being considered to allow associates working from home or other ~~benefits were enhanced and implemented~~sites to ~~support Great Southern associates. Part-time associates were awarded paid sick benefits for~~return to their normal workplace in the first time. Any full-time or part-time associate will receive full pay if placed under a restrictive quarantine due to COVID-19 infection or direct exposure to an infected individual. The Company’s Employee Assistance Program (EAP) was enhanced at no cost to associates and family members seeking counseling services for mentalthird quarter of 2021, dependent on health and ~~emotional support needs.~~safety conditions.

As a token of appreciation for our employees’ dedication over the past several months, and to help support some of the needs of our associates, in August 2020, the Company again rewarded all full-time and part-time associates with special pre-tax bonuses of $1,000 and $600, respectively. This August bonus and related benefits expense totaled $1.1 million. This is the second such bonus paid by the Company in response to the COVID-19 pandemic; the first (also totaling $1.1 million) was approved in March 2020.

~~Great Southern Communities~~: Throughout 2020, we have continued to support local COVID-19 relief efforts through contributions to food banks, local United Way agencies and other nonprofit organizations to address food insecurity and support critical health and human services. Many of our employees also volunteer their time to serve various agencies and charitable organizations in their communities.

~~Great Southern Customers~~: Taking care of customers and providing uninterrupted access to services are top priorities. As always, customers can conduct their banking business using the banking center network, online and mobile banking services, ATMs, Telephone Banking, and online account opening services. As health conditions in local markets dictate, Great Southern banking center lobbies are open following ~~strict~~ social distancing ~~guidance from~~and health protocols. Great Southern continues to work with customers experiencing hardships caused by the ~~CDC and local government officials. If customer lobbies are closed in a market area, then drive-thru service and in-person service by appointment are available.~~

pandemic. As a resource to customers, a COVID-19 information center has been made available on the Company’s website, ~~www.GreatSouthernBank.com~~.www.GreatSouthernBank.com. General information about the Company’s pandemic response, how to receive assistance, and how to avoid COVID-19 scams and fraud are included.

Impacts to Our Business Going Forward: The magnitude of the impact on the Company of the COVID-19 pandemic ~~is not yet fully known,~~continues to evolve, and will ultimately depend on the remaining length and severity of the economic downturn brought on by the pandemic. Some positive economic signs have occurred in 2021, such as lower unemployment rates, improving gross domestic product (“GDP”) levels and other measures of the economy and increased vaccination rates. The Company expects that the COVID-19 pandemic ~~will continue to~~could still impact our business ~~in future periods~~ in one or more of the following ways, among others. Each of these factors could, individually or collectively, result in reduced net income in future periods.

●

Consistently low market interest rates for a significant period of time may have a negative impact on our variable rate loans, resulting in reduced net interest income

●

Certain fees for deposit and loan products may be waived or reduced

●

Non-interest expenses may increase as we continue to deal with the effects of the COVID-19 pandemic, including cleaning costs, supplies, equipment and other items

●

Banking center lobbies have been closed at various times, and may close again in future periods if the pandemic situation worsens again

●

Additional loan modifications may occur and borrowers may default on their loans, which may necessitate further increases to the allowance for credit losses

●

A contraction in economic activity may reduce demand for our loans and for our other products and services

·~~Significantly lower market interest rates will have a negative impact on our variable rate loans indexed to LIBOR and prime~~

·~~Certain fees for deposit and loan products may be waived or reduced~~

·Point-of-sale fee income may decline due to a decrease in spending by our debit card customers as they deal with state and local government requirements and other restrictions and may be adversely affected by reductions in their personal income and job losses

·~~Non-interest expenses may increase as we continue to deal with the effects of the COVID-19 pandemic, including cleaning costs, supplies, equipment and other items~~

·~~Banking center lobbies are open, but could be closed again if the pandemic situation worsens~~

·~~Additional loan modifications may occur and borrowers may default on their loans, which may necessitate further increases to the allowance for loan losses~~

·~~The contraction in economic activity may reduce demand for our loans and for our other products and services~~

Paycheck Protection Program Loans

Great Southern is actively participating in the Paycheck Protection Program (PPP) through the Small Business Administration (SBA). The PPP has been met with very high demand throughout the country, resulting in a second round of funding through an amendment to the CARES Act. AsIn the earlier round of ~~September 30, 2020,~~the PPP, we originated approximately 1,600 PPP loans totaling approximately $121 million. As of May 5, 2021, full forgiveness proceeds have been received from the SBA for 1,249 of these PPP loans totaling approximately $73 million.

On December 27, 2020, the Economic Aid to Hard-Hit Small Businesses, Nonprofits and Venues Act authorized the reopening of the PPP for eligible first-draw and second-draw borrowers which began on January 19, 2021, and had an original expiration date of March 31, 2021. On March 30, 2021, the PPP Extension Act of 2021 was signed, extending the PPP an additional two months to May 31, 2021, and providing an additional 30-day period for the SBA to process applications that are still pending. Since the reopening period began in January 2021, the Company has funded 1,574 loans totaling approximately $56 million.

Great Southern ~~has received $4.7 million in~~receives fees from the SBA for originating ~~these~~PPP loans based on the amount of each loan. At March 31, 2021, remaining net deferred fees related to PPP loans totaled $3.9 million. The fees, net of origination costs, ~~will be~~are deferred in accordance with standard accounting practices and will be accreted to interest income on loans over the contractual life of each loan. These loans originated in 2020 generally have a contractual maturity of two years from origination date and those originated in 2021 generally have a contractual maturity of five years from the origination date, but may be repaid or forgiven (by the SBA) sooner. If these loans are repaid or forgiven prior to their contractual maturity date, the remaining deferred fee for such loan will be accreted to interest income on loans immediately. We expect a ~~high percentage~~portion of these remaining net deferred fees will accrete to interest income in the ~~fourth quarter of 2020 and the first~~second quarter of 2021. In the three months ended ~~September 30, 2020,~~March 31, 2021, Great Southern recorded approximately ~~$440,000~~$1.2 million of these net deferred fees in interest income on loans.

Loan Modifications

At ~~September 30, 2020, we~~March 31, 2021, the Company had remaining 8819 modified commercial loans with an aggregate principal balance outstanding of ~~$379~~$141 million and ~~407~~92 modified consumer and mortgage loans with an aggregate principal balance outstanding of ~~$17~~$5 million. These balances have decreased from $233 million and $18 million, respectively, for these loan categories at December 31, 2020. The loan modifications are within the guidance provided by the ~~Coronavirus Aid, Relief, and Economic Security~~CARES Act, ~~(CARES Act),~~ the federal banking regulatory agencies, the ~~Securities and Exchange Commission (SEC)~~SEC and the Financial Accounting Standards Board (FASB); therefore, they are not considered ~~troubled debt restructurings or classified assets for regulatory purposes.~~TDRs. At ~~September 30, 2020,~~March 31, 2021, the largest total modified loans by collateral type were in the following ~~categories (dollars in millions):~~categories: hotel/motel - $69 million; healthcare - $28 million; retail - $22 million; multifamily - $11 million.

Collateral Type
# of Loans
Modified

$ of Loans
Modified

Interest Only
3 Months

Interest Only
4-6 Months

Interest Only
7-12 Months

Full Payment Deferral
3 Months

Full Payment Deferral
6 Months
Weighted Average Loan to Value

Retail
12
$
47.8
$
—
$
5.3
$
36.1
$
2.9
$
3.5
57%
Multifamily
8

78.4

7.6

46.3

24.4

0.1

—
71%
Healthcare
7

56.3

—

9.6

11.3

—

35.4
66%
Hotel/Motel
13

105.4

20.8

34.6

10.5

—

39.5
68%
Office
9

31.3

—

24.0

4.3

3.0

—
44%
Warehouse/Other
10

15.7

3.7

—

—

—

12.0
61%
Restaurants
9

15.2

—

3.7

—

—

11.5
55%
Commercial Business
15

16.4

5.2

—

5.5

—

5.7

Land
5

12.2

11.3

—

0.9

—

—

Total Commercial
88

378.7

48.6

123.5

93.0

6.0

107.6

Residential Mortgage
53

11.0

—

—

—

2.1

8.9
68%
Consumer
354

5.8

—

—

—

0.2

5.6

Total Consumer
407

16.8

—

—

—

2.3

14.5

Total
495
$
395.5
$
48.6
$
123.5
$
93.0
$
8.3
$
122.1

During the three months ended September 30, 2020, loans with an aggregate principal balance outstanding of $602 million completed the modification period and returned to their normal payment schedule. Of the loans modified at June 30, 2020, $55.8 million in payments were received on these loans during the three months ended September 30, 2020. A portion of the loans modified at ~~September 30, 2020~~March 31, 2021, may be further modified, and new loans may be modified, within the guidance provided by the CARES Act (and subsequent legislation enacted in December 2020), the federal banking regulatory agencies, the SEC and the FASB if a more severe or lengthier deterioration in economic conditions occurs in future periods.

The Company has escalated monitoring activities related to the modified loans and has also increased review and monitoring activities for certain sectors of the loan portfolio which may be currently most impacted by the COVID-19 pandemic. The retail portfolio had an outstanding balance of $388 million at September 30, 2020, which was 11% of the total loan portfolio. It is a very granular portfolio, with an average loan size of $1.6 million. Most loans are under $5 million, with 28% of the outstanding balance of the retail portfolio represented by loans in excess of $10 million. At September 30, 2020, the weighted average loan-to-value ratio of this portfolio was 61%.

The hotel/motel portfolio had an outstanding balance of $196 million at September 30, 2020, which was 5% of the total loan portfolio. The average loan size is $4.3 million, with the 20 largest loans comprising approximately 90% of the portfolio. These properties are well-diversified geographically, mainly throughout the Midwest, with most being limited-service properties. Approximately 92% of the portfolio operates under the flag of major hotel chains. At September 30, 2020, the weighted average loan-to-value ratio of this portfolio was 56%.

The restaurant portfolio had an outstanding balance of $72 million at September 30, 2020, which was 2% of the total loan portfolio. It is a very granular portfolio, with the majority of the restaurants operating in Missouri, Illinois, Iowa and Minnesota. The majority of these loans are to franchisees of top-tier quick service brands with national scale that have had the ability to stay open with delivery and drive-through service throughout the course of the pandemic. At September 30, 2020, the weighted average loan-to-value ratio of this portfolio was 59%.

~~Total loans outstanding (excluding FDIC-assisted acquired loans, net of discount) in the following categories at September 30, 2020, were as follows (dollars in millions):~~

Collateral Type

Outstanding
Balance of
Loans of This
Collateral Type

Percentage of Loans Modified To Total Loans
of This
Collateral Type

Percentage
of Loans
Modified To
Total Loans

Percentage
of Loans of This Collateral
Type to
Total Loans

Weighted Average Loan to Value of Loans in This Collateral Type

Retail
$
388.0

12%

1%

11%

61%
Healthcare

284.3

28%

2%

8%

59%
Hotel/Motel

196.2

29%

2%

5%

56%
Multifamily

988.0

11%

3%

27%

63%
Office

274.8

11%

1%

7%

68%
Warehouse/Other

282.4

6%

<1%

8%

57%
Commercial Business(1)

242.2

6%

<1%

7%

Restaurants

72.0

23%

<1%

2%

59%
Land

67.2

18%

<1%

2%

59%
Total Commercial

2,795.1

14%

10%

76%

Residential Mortgage

619.5

2%

<1%

17%

71%
Consumer

254.1

2%

<1%

7%

Total Consumer

873.6

2%

<1%

24%

Total
$
3,668.7

11%

11%

100%

(1) The Commercial Business outstanding loan balance excludes PPP loans of $121.1 million.

General

The profitability of the Company and, more specifically, the profitability of its primary subsidiary, the Bank, depend primarily on net interest income, as well as provisions for ~~loan~~credit losses and the level of non-interest income and non-interest expense. Net interest income is the difference between the interest income the Bank earns on its loans and investment portfolios, and the interest it pays on interest-bearing liabilities, which consists mainly of interest paid on deposits and borrowings. Net interest income is affected by the relative amounts of interest-earning assets and interest-bearing liabilities and the interest rates earned or paid on these balances. When interest-earning assets approximate or exceed interest-bearing liabilities, any positive interest rate spread will generate net interest income.

Great ~~Southern's~~Southern’s total assets increased ~~$427.9~~$77.4 million, or ~~8.5%~~1.4%, from ~~$5.02~~$5.53 billion at December 31, ~~2019,~~2020, to ~~$5.44~~$5.60 billion at ~~September 30, 2020. Full details~~March 31, 2021. Details of the current period changes in total assets are provided in the “Comparison of Financial Condition at ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019”~~2020” section of this Quarterly Report on Form 10-Q.

Loans.Net outstanding loans ~~increased $259.8~~decreased $11.1 million, or ~~6.3%~~0.3%, from ~~$4.15~~$4.30 billion at December 31, ~~2019,~~2020, to ~~$4.41~~$4.29 billion at ~~September 30, 2020.~~March 31, 2021. The net ~~increase~~decrease in loans reflects reductions of ~~$21.1~~$6.7 million in the FDIC-assisted acquired loan portfolios. This ~~increase~~decrease was primarily in construction loans, home equity lines of credit, and consumer auto loans. This decrease was offset by increases in other residential (multi-family) loans ~~commercial business loans, one- to four-family residential loans~~ and commercial real estate loans. Approximately 61% of the one- to- four-family residential loan originations in the nine months ended September 30, 2020 were refinanced loans. These increases were partially offset by decreases in construction loans and consumer auto loans. The increases were primarily due to loan growth in our existing banking center network and our commercial loan production offices, and included approximately $121 million of PPP loans. Excluding FDIC-assisted acquired loans and mortgage loans held for sale, total gross loans ~~increased $229.6~~decreased $2.7 million, or ~~4.7%~~0.1%, from December 31, ~~2019~~2020 to ~~September 30, 2020.~~March 31, 2021. As loan demand is affected by a variety of factors, including general economic conditions, and because of the competition we face and our focus on pricing discipline and credit quality, no assurances can be made regarding our future loan growth. We expect minimal loan growth for the foreseeable future due to ~~deteriorating economic conditions~~the remaining uncertainty resulting from the COVID-19 pandemic. The ~~Company's~~Company’s strategy continues to be focused on maintaining credit risk and interest rate risk at appropriate levels.

Recent loan growth has occurred in several loan types, primarily other residential (multi-family) loans ~~one- to four-family residential mortgage loans~~ and commercial ~~business~~real estate loans and in most of Great Southern’s primary lending locations, including Springfield, St. Louis, Kansas City, Des Moines and Minneapolis, as well as our loan production offices in Atlanta, Chicago, Dallas, Denver, Omaha and Tulsa. Certain minimum underwriting standards and monitoring help assure the Company’s portfolio quality. Great Southern’s loan committee reviews and approves all new loan originations in excess of lender approval authorities. Generally, the Company considers commercial construction, consumer, and commercial real estate loans to involve a higher degree of risk compared to some other types of loans, such as first mortgage loans on one- to four-family, owner-occupied residential properties. For commercial real estate, commercial business and construction loans, the credits are subject to an analysis of the borrower’s and guarantor’s financial condition, credit history, verification of liquid assets, collateral, market analysis and repayment ability. It has been, and continues to be, Great Southern’s practice to verify information from potential borrowers regarding assets, income or payment ability and credit ratings as applicable and as required by the authority approving the loan. To minimize construction risk, projects are monitored as construction draws are requested by comparison to budget and with progress verified through property inspections. The geographic and product diversity of collateral, equity requirements and limitations on speculative construction projects help to mitigate overall risk in these loans. Underwriting standards for all loans also include loan-to-value ratio limitations, which vary depending on collateral type, debt service coverage ratios or debt payment to income ratio guidelines, where applicable, credit histories, use of guaranties and other recommended terms relating to equity requirements, amortization, and maturity. Consumer loans are primarily secured by new and used motor vehicles and these loans are also subject to certain minimum underwriting standards to assure portfolio quality. While Great Southern’s consumer underwriting and pricing standards have been fairly consistent in recent years, the Company tightened its underwriting guidelines on automobile lending beginning in the latter part of 2016. Management took this step in an effort to improve credit quality in the portfolio and reduce delinquencies and charge-offs. The underwriting standards employed by Great Southern for consumer loans include a determination of the applicant's payment history on other debts, credit scores, employment history and an assessment of ability to meet existing obligations and payments on the proposed loan. In 2019, the Company ~~discontinued~~made the decision to discontinue indirect auto loan originations. See “Item 1. Business – Lending Activities – General, – Commercial Real Estate and Construction Lending, and – Consumer Lending” in the Company’s December 31, 2019 Annual Report on Form 10-K.

While our policy allows us to lend up to 95% of the appraised value on one-to four-family residential properties, originations of loans with loan-to-value ratios at that level are minimal. Private mortgage insurance is typically required for loan amounts above the 80% level. Few exceptions occur and would be based on analyses which determined minimal transactional risk to be involved. We consider these lending practices to be consistent with or more conservative than what we believe to be the norm for banks our size. At ~~September 30, 2020 and~~March 31, 2021, 0.1% of the owner occupied portfolio had loan-to-value ratios above 100% at origination, all of which were FDIC-acquired loans. At December 31, ~~2019,~~2020, none of our owner occupied one- to four-family residential loans had loan-to-value ratios above 100% at origination. At ~~both September 30, 2020~~March 31, 2021 and December 31, ~~2019,~~2020, an estimated 0.6% of total non-owner occupied one- to four-family residential loans had loan-to-value ratios above 100% at origination.

At ~~September 30, 2020, troubled debt restructurings~~March 31, 2021, TDRs, including FDIC-acquired loans, totaled ~~$3.7~~$4.0 million, or 0.09% of total loans, an increase of $689,000 from $3.3 million, or 0.08% of total loans, ~~an increase of $1.8 million from $1.9 million, or 0.05% of total loans,~~ at December 31, ~~2019.~~2020. The December 31, 2020 amount excludes $1.7 million of FDIC-acquired loans accounted for under ASC 310-30. Concessions granted to borrowers experiencing financial difficulties may include a reduction in the interest rate on the loan, payment extensions, forgiveness of principal, forbearance or other actions intended to maximize

collection. For ~~troubled debt restructurings~~TDRs occurring during the ~~nine~~three months ended ~~September 30, 2020, six loans totaling $149,000~~March 31, 2021, none were restructured into multiple new loans. For ~~troubled debt restructurings~~TDRs occurring during the year ended December 31, ~~2019,~~2020, five loans totaling ~~$34,000~~$107,000 were restructured into multiple new loans. For further information on ~~troubled debt restructurings,~~TDRs, see Note 6 of the Notes to Consolidated Financial Statements contained in this report. In accordance with the CARES Act and guidance from the banking regulatory agencies, we made certain short-term modifications to loan terms to help our customers navigate through the current pandemic situation. Although loan modifications were made, they did not result in these loans being classified as ~~troubled debt restructurings,~~TDRs, potential problem loans or non-performing loans. As of March 31, 2021, $141 million of commercial loans and $5 million of residential and consumer loans were subject to such modifications. If more severe or lengthier negative impacts of the COVID-19 pandemic occur or the effects of the SBA loan programs and other loan and stimulus programs do not enable companies and individuals to completely recover financially, this could result in more and/or longer-term modifications, which may be deemed to be ~~troubled debt restructurings,~~TDRs, additional potential problem loans and/or additional non-performing loans.

Loans that were acquired through FDIC-assisted transactions, which are accounted for in pools, are currently included in the analysis and estimation of the allowance for loan losses. If expected cash flows to be received on any given pool of loans decreases from previous estimates, then a determination is made as to whether the loan pool should be charged down or the allowance for loan losses should be increased (through a provision for loan losses). Acquired loans are described in ~~Note 7~~ of the Notes to Consolidated Financial Statements contained in this report. For acquired loan pools, the Company may allocate, and at September 30, 2020, has allocated, a portion of its allowance for loan losses related to these loan pools in a manner similar to how it allocates its allowance for loan losses to those loans which are collectively evaluated for impairment.

The level of non-performing loans and foreclosed assets affects our net interest income and net income. We generally do not accrue interest income on these loans and do not recognize interest income until the loans are repaid or interest payments have been made for a period of time sufficient to provide evidence of performance on the loans. Generally, the higher the level of non-performing assets, the greater the negative impact on interest income and net income.

The Company continues its preparation for discontinuation of interest rates such as LIBOR. LIBOR is a benchmark interest rate referenced in a variety of agreements that are used by the Company, but by far the most significant area impacted by LIBOR is related to commercial and residential mortgage loans. After 2021, certain LIBOR rates may no longer be published and it is expected to eventually be discontinued as a reference rate. Other interest rates used globally could also be discontinued for similar reasons.

The Company has been monitoring its portfolio of loans tied to LIBOR on a regular frequency since 2019, with specific groups of loans identified. The Company implemented robust LIBOR fallback language for all commercial loan transactions beginning near the end of 2018, with such language implemented with all new originations and renewed/modified commercial loans since that time. The Company is particularly monitoring the remaining group of loans that originated prior to the fourth quarter of 2018, have not been renewed or modified, and do not mature prior to December 31, 2021. This represented approximately 100 commercial loans totaling approximately $500 million; however, only 40 of those loans, totaling $73 million, mature after June 2023 (the date upon which the LIBOR indices used by the Company are expected to no longer be available). The Company also has a portfolio of residential mortgage loans tied to LIBOR indices with standard index replacement language included (approximately $400 million), and that portfolio is being monitored for potential changes that may be facilitated by the mortgage industry. As described, the vast majority of the loan portfolio tied to LIBOR now includes robust LIBOR replacement language which identifies appropriate “trigger” events for the cessation of LIBOR and the steps that the Company will take upon the occurrence of one or more of those events, including adjustments to any rate margin to ensure that the replacement interest rate on the loan is equivalent to the previous LIBOR-based rate.

Available-for-sale Securities.In the ~~nine~~three months ended ~~September 30, 2020,~~March 31, 2021, available-for-sale securities increased ~~$71.7~~$42.7 million, or ~~19.2%~~10.3%, from ~~$374.2~~$414.9 million at December 31, ~~2019,~~2020, to ~~$445.9~~$457.7 million at ~~September 30, 2020.~~March 31, 2021. The increase was primarily due to the purchase of ~~FNMA and GNMA~~U.S. Government agency fixed-rate multi-family mortgage-backed securities and collateralized mortgage ~~obligations and short-term municipal~~obligation securities, partially offset by calls of municipal securities and normal monthly payments received related to the portfolio of ~~mortgage-backed~~these U.S. Government agency securities. The Company used increased deposits to fund this increase in investment securities.

Deposits.The Company attracts deposit accounts through its retail branch network, correspondent banking and corporate services areas, and brokered deposits. The Company then utilizes these deposit funds, along with FHLBank advances and other borrowings, to meet loan demand or otherwise fund its activities. In the ~~nine~~three months ended ~~September 30, 2020,~~March 31, 2021, total deposit balances increased ~~$483.7~~$110.0 million, or ~~12.2%~~2.4%. T~~ransaction~~Transaction account balances increased ~~$694.3~~$249.2 million, or ~~31.0%~~8.0%, to ~~$2.93~~$3.38 billion at ~~September 30, 2020~~,March 31, 2021, while retail certificates of deposit decreased ~~$81.8~~$80.9 million, or ~~6.1%~~6.6%, to ~~$1.27~~$1.15 billion at ~~September 30, 2020~~.March 31, 2021. The increases in transaction accounts were primarily a result of ~~increased customers~~increases in ~~the CDARS reciprocal program,~~various money market accounts and NOW deposit accounts. Retail certificates of deposit decreased due to a decrease in retail certificates generated through the banking center network ~~partially offset by~~and decreases in National CDs initiated through internet channels. CDs initiated through internet channels experienced a planned decrease due to increases in ~~customer deposits in~~overall liquidity levels and to reduce the ~~CDARS reciprocal program.~~Company’s cost of funds. Customer deposits at ~~September 30, 2020~~ March 31, 2021 and December 31, ~~2019,~~2020, totaling ~~$56.1~~$36.5 million and ~~$35.3~~$39.4 million, respectively, were part of the CDARS program, which allows customers to maintain balances in an insured manner that would otherwise exceed the FDIC deposit insurance limit. Brokered deposits, including CDARS program purchased funds, were ~~$242.9~~$100.4 million at ~~September 30, 2020~~,March 31, 2021, a decrease of ~~$128.8~~$58.3 million from ~~$371.7~~$158.7 million at December 31, ~~2019.~~2020. The brokered deposits were allowed to mature without replacement as other deposit categories ~~increased.~~

increased and to reduce the Company’s cost of funds.

Our deposit balances may fluctuate depending on customer preferences and our relative need for funding. We do not consider our retail certificates of deposit to be guaranteed long-term funding because customers can withdraw their funds at any time with minimal

interest penalty. When loan demand trends upward, we can increase rates paid on deposits to attract more deposits and utilize brokered deposits to provide additional funding. The level of competition for deposits in our markets is high. It is our goal to gain deposit market share, particularly checking accounts, in our branch footprint. To accomplish this goal, increasing rates to attract deposits may be necessary, which could negatively impact the Company’s net interest margin.

Our ability to fund growth in future periods may also depend on our ability to continue to access brokered deposits and FHLBank advances. In times when our loan demand has outpaced our generation of new deposits, we have utilized brokered deposits and FHLBank advances to fund these loans. These funding sources have been attractive to us because we can create either fixed or variable rate funding, as desired, which more closely matches the interest rate nature of much of our loan portfolio. It also gives us greater flexibility in increasing or decreasing the duration of our funding. While we do not currently anticipate that our ability to access these sources will be reduced or eliminated in future periods, if this should happen, the limitation on our ability to fund additional loans could have a material adverse effect on our business, financial condition and results of operations.

~~Federal Home Loan Bank Advances and Short-Term Borrowings.~~ ~~The Company had no Federal Home Loan Bank advances outstanding at~~ ~~September 30, 2020~~ ~~or December 31, 2019. At~~ ~~September 30, 2020,~~ there were also no overnight borrowings from the FHLBank. At December 31, 2019, there were no borrowings from the FHLBank other than overnight advances, which are included in the short term borrowings category.

Short term borrowings and other interest-bearing liabilities decreased $227.0 million from $228.2 million at December 31, 2019 to $1.2 million at September 30, 2020. The short term borrowings included overnight FHLBank borrowings of $-0- and $196.0 million at September 30, 2020 and December 31, 2019, respectively. The Company utilizes both overnight borrowings and short-term FHLBank advances depending on relative interest rates.

Securities sold under reverse repurchase agreements with customers. Securities sold under reverse repurchase agreements with customers ~~increased $70.8~~decreased $23.5 million from ~~$84.2~~$164.2 million at December 31, ~~2019~~2020 to ~~$155.0~~$140.7 million at ~~September 30, 2020~~.March 31, 2021. These balances fluctuate over time based on customer demand for this product. ~~A large portion of this increase is related to two customers who placed additional funds in these account types.~~

~~Subordinated notes.~~ ~~Subordinated notes increased $74.0 million from $74.2 million at December 31, 2019 to $148.2 million at~~ ~~September 30, 2020. The Company issued $75.0 million of subordinated notes in June 2020, receiving net proceeds of $73.5 million.~~

Net Interest Income and Interest Rate Risk Management.Our net interest income may be affected positively or negatively by changes in market interest rates. A large portion of our loan portfolio is tied to one-month LIBOR, three-month LIBOR or the ~~"prime rate"~~“prime rate” and adjusts immediately or shortly after the index rate adjusts (subject to the effect of contractual interest rate floors on some of the loans, which are discussed below). We monitor our sensitivity to interest rate changes on an ongoing basis (see ~~"Item~~“Item 3. Quantitative and Qualitative Disclosures About Market ~~Risk"~~Risk”). In addition, our net interest income has been impacted by changes in the cash flows expected to be received from acquired loan pools. As described in Note 7 of the Notes to the Consolidated Financial Statements contained in this report, the Company’s evaluation of cash flows expected to be received from acquired loan pools has been on-going and increases in cash flow expectations have been recognized as increases in accretable yield through interest income. Decreases in cash flow expectations have been recognized as impairments through the allowance for ~~loan~~credit losses.

The current level and shape of the interest rate yield curve poses challenges for interest rate risk management. Prior to its increase of 0.25% on December 16, 2015, the FRB had last changed interest rates on December 16, 2008. This was the first rate increase since September 29, 2006. The FRB also implemented rate change increases of 0.25% on eight additional occasions beginning December 14, 2016 and through December 31, 2018, with the Federal Funds rate reaching as high as 2.50%. After December 2018, the FRB paused its rate increases and, in July, September and October 2019, implemented rate change decreases of 0.25% on each of those occasions. At December 31, 2019, the Federal Funds rate stood at 1.75%. In response to the COVID-19 pandemic, the FRB decreased interest rates on two occasions in March 2020, a 0.50% decrease on March 3 and a 1.00% decrease on March 16. At ~~September 30, 2020,~~March 31, 2021, the Federal Funds rate stood at 0.25%. The FRB met in April 2021 and indicated they plan to keep the rates steady. A substantial portion of Great Southern’s loan portfolio ($~~2.10~~2.00 billion at ~~September 30, 2020~~)March 31, 2021) is tied to the one-month or three-month LIBOR index and will be subject to adjustment at least once within 90 days after ~~September 30, 2020~~.March 31, 2021. Of these loans, ~~$2.08~~$1.97 billion had interest rate floors. Great Southern also has a portfolio of loans ($~~256~~246 million at ~~September 30, 2020~~)March 31, 2021) tied to a ~~"prime rate"~~“prime rate” of interest and will adjust immediately with changes to the “prime rate” of interest. A rate cut by the FRB generally would have an anticipated immediate negative impact on the Company’s net interest income due to the large total balance of loans tied to the one-month or three-month LIBOR index and will be subject to adjustment at least once within 90 days or loans which generally adjust immediately as the Federal Funds rate adjusts. Interest rate floors may at least partially mitigate the negative impact of interest rate decreases. Loans at their floor rates are, however, subject to the risk that borrowers will seek to refinance elsewhere at the lower market rate. Because the Federal Funds rate is again very low, there may also be a negative impact on the ~~Company's~~Company’s net interest income due to the ~~Company's~~Company’s inability to significantly lower its funding costs in the current competitive rate environment, although interest rates on assets may decline further. Conversely, interest rate increases would normally result in increased interest rates on our LIBOR-based and prime-based loans. As of ~~September 30, 2020~~,March 31, 2021, Great ~~Southern's~~Southern’s interest rate risk models indicate that, generally, rising interest rates are expected to have a positive impact on the ~~Company's~~Company’s net interest income,

while declining interest rates are expected to have a negative impact on net interest income. We model various interest rate scenarios for rising and falling rates, including both parallel and non-parallel shifts in rates. The results of our modeling indicate that net interest income is not likely to be significantly affected either positively or negatively in the first twelve months following a rate change, regardless of any changes in interest rates, because our portfolios are relatively well-matched in a twelve-month horizon. In a situation where market interest rates decrease significantly in a short period of time, as they did in March 2020, our net interest margin decrease may be more pronounced in the very near term (first one to three months), due to fairly rapid decreases in LIBOR interest rates. In the subsequent months we expect that the net interest margin would stabilize and begin to improve, as renewal interest rates on maturing time deposits are expected to decrease compared to the current rates paid on those products. During ~~the latter half of 2019 and the nine months ended September 30,~~ 2020, we did experience some compression of our net interest margin ~~percentage~~ due to 2.25% of

Federal Fund rate cuts during the nine month period of July 2019 through March 2020. Margin compression primarily resulted from ~~generally slower changing average interest rates on deposits~~changes in the asset mix, mainly the addition of lower-yielding asset and ~~borrowings and lower yields on loans and other interest-earning assets.~~the issuance of subordinated notes during 2020. LIBOR interest rates have ~~recently~~ decreased, putting pressure on loan yields, and strong pricing competition for loans and deposits remains in most of our markets. For further discussion of the processes used to manage our exposure to interest rate risk, see “Item 3. Quantitative and Qualitative Disclosures About Market Risk – How We Measure the Risks to Us Associated with Interest Rate Changes.”

Non-Interest Income and Non-Interest (Operating) Expenses.The ~~Company's~~Company’s profitability is also affected by the level of its non-interest income and operating expenses. Non-interest income consists primarily of service charges and ATM fees, late charges and prepayment fees on loans, gains on sales of loans and available-for-sale investments and other general operating income. Non-interest income may also be affected by the ~~Company's~~Company’s interest rate derivative activities, if the Company chooses to implement derivatives. See Note 16 “Derivatives and Hedging Activities” in the Notes to Consolidated Financial Statements included in this report.

Operating expenses consist primarily of salaries and employee benefits, occupancy-related expenses, expenses related to foreclosed assets, postage, FDIC deposit insurance, advertising and public relations, telephone, professional fees, office expenses and other general operating expenses. Details of the current period changes in non-interest income and non-interest expense are provided in the “Results of Operations and Comparison for the Three ~~and Nine~~ Months Ended ~~September 30, 2020~~March 31, 2021 and ~~2019”~~2020” section of this report.

Effect of Federal Laws and Regulations

General.Federal legislation and regulation significantly affect the operations of the Company and the Bank, and have increased competition among commercial banks, savings institutions, mortgage banking enterprises and other financial institutions. In particular, the capital requirements and operations of regulated banking organizations such as the Company and the Bank have been and will be subject to changes in applicable statutes and regulations from time to time, which changes could, under certain circumstances, adversely affect the Company or the Bank.

Dodd-Frank Act.In 2010, sweeping financial regulatory reform legislation entitled the “Dodd-Frank Wall Street Reform and Consumer Protection Act” (the “Dodd-Frank Act”) was signed into law. The Dodd-Frank Act implemented far-reaching changes across the financial regulatory landscape. Certain aspects of the Dodd-Frank Act have been affected by the more recently enacted Economic Growth Act, as defined and discussed below under “-Economic Growth Act.”

Capital Rules.The federal banking agencies have adopted regulatory capital rules that substantially amend the risk-based capital rules applicable to the Bank and the Company. The rules implement the “Basel III” regulatory capital reforms and changes required by the Dodd-Frank Act. “Basel III” refers to various documents released by the Basel Committee on Banking Supervision. For the Company and the Bank, the general effective date of the rules was January 1, 2015, and, for certain provisions, various phase-in periods and later effective dates apply. The chief features of these rules are summarized below.

The rules refine the definitions of what constitutes regulatory capital and add a new regulatory capital element, common equity Tier 1 capital. The minimum capital ratios are (i) a common equity Tier 1 (“CET1”) risk-based capital ratio of 4.5%; (ii) a Tier 1 risk-based capital ratio of 6%; (iii) a total risk-based capital ratio of 8%; and (iv) a Tier 1 leverage ratio of 4%. In addition to the minimum capital ratios, the rules include a capital conservation buffer, under which a banking organization must have CET1 more than 2.5% above each of its minimum risk-based capital ratios in order to avoid restrictions on paying dividends, repurchasing shares, and paying certain discretionary bonuses. The capital conservation buffer requirement began phasing in on January 1, 2016 when a buffer greater than 0.625% of risk-weighted assets was required, which amount increased an equal amount each year until the buffer requirement of greater than 2.5% of risk-weighted assets became fully implemented on January 1, 2019.

Effective January 1, 2015, these rules also revised the prompt corrective action framework, which is designed to place restrictions on insured depository institutions if their capital levels show signs of weakness. Under the revised prompt corrective action requirements, insured depository institutions are required to meet the following in order to

qualify as “well capitalized:” (i) a common equity Tier 1 risk-based capital ratio of at least 6.5%, (ii) a Tier 1 risk-based capital ratio of at least 8%, (iii) a total risk-based capital ratio of at least 10% and (iv) a Tier 1 leverage ratio of 5%, and must not be subject to an order, agreement or directive mandating a specific capital level.

Economic Growth Act.In May 2018, the Economic Growth, Regulatory Relief, and Consumer Protection Act (the “Economic Growth Act”), was enacted to modify or eliminate certain financial reform rules and regulations, including some implemented under the Dodd-Frank Act. While the Economic Growth Act maintains most of the regulatory structure established by the Dodd-Frank Act, it amends

certain aspects of the regulatory framework for small depository institutions with assets of less than $10 billion and for large banks with assets of more than $50 billion. Many of these amendments could result in meaningful regulatory changes.

The Economic Growth Act, among other matters, expands the definition of qualified mortgages which may be held by a financial institution and simplifies the regulatory capital rules for financial institutions and their holding companies with total consolidated assets of less than $10 billion by instructing the federal banking regulators to establish a single “Community Bank Leverage Ratio” of between 8 and 10 percent. Any qualifying depository institution or its holding company that exceeds the “Community Bank Leverage Ratio” will be considered to have met generally applicable leverage and risk-based regulatory capital requirements and any qualifying depository institution that exceeds the new ratio will be considered “well-capitalized” under the prompt corrective action rules. Effective January 1, 2020, the Community Bank Leverage Ratio was 9.0%. In April 2020, pursuant to the CARES Act, the federal bank regulatory agencies announced the issuance of two interim final rules, effective immediately, to provide temporary relief to community banking organizations. Under the interim final rules, the Community Bank Leverage Ratio requirement is a minimum of ~~8% for the remainder of calendar year 2020,~~ 8.5% for calendar year 2021, and 9% thereafter. The Company and the Bank have chosen to not utilize the new Community Bank Leverage Ratio due to the Company’s size and complexity, including its commercial real estate and construction lending concentrations and significant off-balance sheet funding commitments.

In addition, the Economic Growth Act includes regulatory relief in the areas of examination cycles, call reports, mortgage disclosures and risk weights for certain high-risk commercial real estate loans.

Business Initiatives

Great Southern is actively monitoring and responding to the effects of the evolving COVID-19 pandemic. As always, the health, safety and well-being of our customers, associates and communities while maintaining uninterrupted service are the Company’s top priorities. See the “COVID-19 Business Impact and Response” section of this report for further information, including the Company’s participation in the SBA’s PPP for small businesses.

The Company’s banking center network continues to evolve. In August 2020, remodeling of the downtown office at 1900 Main in Parsons, Kansas, was completed, which included the addition of drive-thru banking lanes. With this completion, the nearby drive-thru facility was consolidated into the downtown office, leaving one location serving the Parsons market.

In the Joplin, ~~Missouri,~~Mo., market, the Company purchased a banking facility in ~~the fourth quarter of~~late 2019 vacated by another financial institution, which included a contractual black-out period ending in April 2021. A third party vendor has been engaged by the Company to redesign this facility as a “bank of the future” prototype to incorporate evolving customer preferences. Variations of this prototype design may be utilized in other select banking centers in the Company’s footprint in the future. The Company expects the new office in Joplin to be completed in the ~~second~~third quarter of 2021, whereupon the nearby leased banking center at 1710 E. 32nd Street will be consolidated into this new office. There are two banking centers currently serving the Joplin market.

~~The Company’s Board~~Great Southern Bank has been recognized as part of ~~Directors recently approved a new stock repurchase program, which will succeed the existing repurchase program (authorized in April 2018) following the repurchase~~Forbes’ annual list of the ~~remaining approximately 75,111 available shares under~~World’s Best Banks 2021. Great Southern was ranked first in the ~~existing program.~~list of best banks in the United States. The ~~new stock repurchase program authorizes the repurchase, from time to time, of up to one million additional shares~~World’s Best Banks list is comprised of the financial institutions that differentiate their services and build trustworthy relationships with their customers. Some 500 banks around the world are featured on the list, which was announced online on April 13, 2021, and can currently be viewed on the Forbes website. The study involved asking 43,000 bank customers from 28 countries to rate banks they are involved with on general satisfaction and key attributes like trust, terms and conditions, customer services, digital services and financial advice.

The Company announced that its 2021 Annual Meeting of Stockholders, to be held at 10 a.m. Central Time on May 12, 2021, will be a virtual meeting over the internet and will not be held at a physical location. Stockholders will be able to attend the Annual Meeting via a live webcast. Holders of record of Great Southern Bancorp, Inc. common stock at the close of business on the record date, March 3, 2021, may vote during the live webcast of the Annual Meeting or by proxy. Please see the Company’s ~~common stock.~~

Notice of Annual Meeting and Proxy Statement available on the Company’s website, www.GreatSouthernBank.com, (click “About” then “Investor Relations”) for additional information about the virtual meeting.

Comparison of Financial Condition at ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019~~

2020

During the ~~nine~~three months ended ~~September 30, 2020,~~March 31, 2021, the Company’s total assets increased by ~~$427.9~~$77.4 million to ~~$5.44~~$5.60 billion. The increase was primarily attributable to increases in ~~loans receivable,~~ available-for-sale investment securities and cash equivalents.

Cash and cash equivalents were ~~$338.3~~$612.6 million at ~~September 30, 2020,~~March 31, 2021, an increase of ~~$118.1~~$48.8 million, or ~~53.6%~~8.7%, from ~~$220.2~~$563.7 million at December 31, ~~2019. This increase was primarily related to excess~~2020. These additional funds were held at the Federal Reserve Bank ~~after repayment of FHLBank overnight borrowings. The additional funds~~and primarily were ~~primarily~~ the result of increases in deposits.

The ~~Company's~~Company’s available-for-sale securities increased ~~$71.7~~$42.7 million, or ~~19.2%~~10.3%, compared to December 31, ~~2019.~~2020. The increase was primarily due to the purchase of ~~FNMA and GNMA~~U.S. Government agency fixed-rate multi-family mortgage-backed securities and ~~short-term municipal~~collateralized mortgage obligation securities, partially offset by calls of municipal securities and normal monthly payments received related to the portfolio of ~~mortgage-backed~~these U.S. Government agency securities. The available-for-sale securities portfolio was 8.2% and 7.5% of total assets at ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019,~~2020, respectively.

Net loans ~~increased $259.8~~decreased $11.1 million from December 31, ~~2019,~~2020, to ~~$4.41~~$4.29 billion at ~~September 30, 2020.~~March 31, 2021. Excluding FDIC-assisted acquired loans and mortgage loans held for sale, total gross loans (including the undisbursed portion of loans) ~~increased $229.6~~decreased $2.7 million, or ~~4.7%~~0.1%, from December 31, ~~2019~~2020 to ~~September 30, 2020.~~March 31, 2021. This ~~increase~~decrease was primarily in construction loans ($24 million), consumer auto loans ($13 million) and home equity lines of credit ($6 million). These decreases were partially offset by increases in other residential (multi-family) loans ($~~152.4~~28 million), and commercial ~~business~~real estate loans ($~~126.0~~12 million)~~, and one- to four-family residential loans ($88.5 million)~~. ~~These increases were partially offset by decreases in construction loans ($117.8 million) and consumer auto loans ($52.6 million).~~

Total liabilities increased ~~$406.4~~$95.6 million, from ~~$4.41~~$4.90 billion at December 31, ~~2019~~2020 to ~~$4.82~~$4.99 billion at ~~September 30, 2020~~.March 31, 2021. The increase was primarily attributable to an increase in deposits, ~~securities sold under reverse repurchase agreements and subordinated notes,~~ partially offset by a decrease in ~~short term borrowings.~~securities sold under reverse repurchase agreements.

Total deposits increased ~~$483.7~~$110.0 million, or ~~12.2%~~2.4%, to ~~$4.44~~$4.63 billion at ~~September 30, 2020. Transaction~~March 31, 2021. Transaction account balances increased ~~$694.3~~$249.2 million to ~~$2.93~~$3.38 billion at ~~September 30, 2020~~,March 31, 2021, while retail certificates of deposit decreased ~~$81.8~~$80.9 million compared to December 31, ~~2019,~~2020, to ~~$1.27~~$1.15 billion at ~~September 30, 2020~~.March 31, 2021. The increase in transaction accounts was primarily a result of increases in NOW deposit accounts, money market accounts and Insured Cash Sweep (ICS) reciprocal accounts. ~~Retail~~Interest-bearing checking accounts increased $172.2 million while demand deposit accounts increased $77.0 million. Customer retail certificates of deposit ~~decreased due to a net decrease in retail certificates generated~~initiated through ~~the~~our banking center network ~~partially offset by increases in customer deposits in the CDARS reciprocal program.~~decreased $27.0 million and certificates of deposit initiated through our national internet network decreased $51.0 million. Customer deposits at ~~September 30, 2020~~ March 31, 2021 and December 31, ~~2019~~2020 totaling ~~$56.1~~$36.5 million and ~~$35.3~~$39.4 million, respectively, were part of the CDARS program, which allows customers to maintain balances in an insured manner that would otherwise exceed the FDIC deposit insurance limit. Brokered deposits, including CDARS program purchased funds, were ~~$242.9~~$100.4 million at ~~September 30, 2020~~,March 31, 2021, a decrease of ~~$128.8~~$58.3 million from ~~$371.7~~$158.7 million at December 31, ~~2019.~~2020. The brokered deposits were allowed to mature without replacement as other deposit categories increased.

~~The Company had no FHLBank advances outstanding at~~ ~~September 30, 2020~~ or December 31, 2019. At December 31, 2019, there were no borrowings from the FHLBank other than overnight advances, which are included in the short term borrowings category. There were no borrowings from the FHLBank outstanding at September 30, 2020.

~~Short term borrowings and other interest-bearing liabilities decreased $227.0 million from $228.2 million at December 31, 2019 to $1.2 million at September 30, 2020. There were no short term borrowings at~~ ~~September 30, 2020 and $196.0 million in short term borrowings~~ ~~included in overnight FHLBank borrowings at December 31, 2019. The Company utilizes both overnight borrowings and short term FHLBank advances depending on relative interest rates.~~

Securities sold under reverse repurchase agreements with customers ~~increased $70.8~~decreased $23.5 million from ~~$84.2~~$164.2 million at December 31, ~~2019~~2020 to ~~$155.0~~$140.7 million at ~~September 30, 2020~~.March 31, 2021. These balances fluctuate over time based on customer demand for this product.

~~Subordinated notes increased $74.0~~Total stockholders’ equity decreased $18.3 million from ~~$74.2~~$629.7 million at December 31, ~~2019~~2020 to ~~$148.2~~$611.5 million at ~~September 30, 2020. The Company issued $75.0 million of subordinated notes in June 2020, receiving net proceeds of $73.5 million.~~

~~Total stockholders' equity increased $21.5 million from $603.1 million at December~~March 31, ~~2019 to $624.6 million at September 30, 2020.~~2021. The Company recorded net income of ~~$41.5~~$18.9 million for the ~~nine~~three months ended ~~September 30, 2020.~~March 31, 2021. In addition, total stockholders’ equity increased $920,000 due to stock option exercises. Accumulated other comprehensive income ~~increased $23.4~~decreased $15.5 million due to ~~increases~~decreases in the fair value of available-for-sale investment securities and the termination value of the cash flow hedge. ~~In addition, total stockholders’~~Stockholders’ equity ~~increased $1.2 million~~also decreased due to ~~stock option exercises. These increases were partially offset by~~ dividends declared on common stock of ~~$28.6~~$4.7 million and repurchases of the Company’s common stock totaling ~~$15.9~~$3.8 million.

In addition, the initial adoption of the CECL accounting standard for credit losses resulted in a decrease in stockholders’ equity of $14.2 million.

Results of Operations and Comparison for the Three ~~and Nine~~ Months Ended ~~September 30,~~March 31, 2021 and 2020 ~~and 2019~~

General

Net income was ~~$13.5~~$18.9 million for the three months ended ~~September 30, 2020~~March 31, 2021 compared to ~~$19.7~~$14.9 million for the three months ended ~~September 30, 2019.~~March 31, 2020. This ~~decrease~~increase of ~~$6.3~~$4.0 million, or ~~31.8%~~26.9%, was primarily due to a decrease in the provision for credit losses on loans and unfunded commitments of $4.2 million, or 109.7%, an increase in noninterest income of $2.4 million, or 32.2%, and a decrease in noninterest expense of ~~$3.3 million,~~$494,000, or ~~11.4%~~1.6%, partially offset by an increase in ~~provision for loan losses~~income tax expense of ~~$2.6~~$2.3 million, or ~~130.8%~~82.1%, and a decrease in net interest income of ~~$1.8 million~~$849,000, or ~~3.8%, partially offset by an increase in noninterest income of $811,000, or 9.4%, and a decrease in income tax expense of $480,000, or 11.5%~~1.9%.

Net income was $41.5 million for the nine months ended September 30, 2020 compared to $55.7 million for the nine months ended September 30, 2019. This decrease of $14.2 million, or 25.5%, was primarily due to an increase in provision for loan losses of $8.9 million, or 161.3%, an increase in noninterest expense of $6.5 million, or 7.7%, and a decrease in net interest income of $2.9 million, or 2.1%, partially offset by a decrease in income tax expense of $2.3 million, or 19.2%, and an increase in noninterest income of $1.8 million, or 7.9%.

Total Interest Income

Total interest income decreased ~~$6.6~~$6.8 million, or ~~10.9%~~11.9%, during the three months ended ~~September 30, 2020~~March 31, 2021 compared to the three months ended ~~September 30, 2019.~~March 31, 2020. The decrease was due to a ~~$6.8~~$6.4 million decrease in interest income on loans ~~partially offset by an increase~~and a $420,000 decrease in interest income on investments and other interest-earning ~~assets of $162,000.~~assets. Interest income on loans decreased for the three months ended ~~September 30, 2020~~March 31, 2021 compared to the same period in ~~2019,~~2020, due to lower average rates of interest on loans, partially offset by higher average balances. Interest income from investment securities and other interest-earning assets ~~increased~~decreased during the three months

ended ~~September 30, 2020~~March 31, 2021 compared to the same period in ~~2019~~2020 primarily due to lower average rates of interest, partially offset by higher average balances of investment securities and other interest-earning ~~assets, partially offset by lower average rates of interest.~~assets.

Total interest income decreased $11.2 million, or 6.3%, during the nine months ended September 30, 2020 compared to the nine months ended September 30, 2019. The decrease was due to a $12.1 million decrease in interest income on loans, partially offset by a $916,000 increase in interest income on investments and other interest-earning assets. Interest income on loans decreased for the nine months ended September 30, 2020 compared to the same period in 2019, due to lower average rates of interest on loans, partially offset by higher average balances. Interest income from investment securities and other interest-earning assets increased during the nine months ended September 30, 2020 compared to the same period in 2019 primarily due to higher average balances of investment securities and other interest-earning assets, partially offset by lower average rates of interest.

Interest Income – Loans

During the three months ended ~~September 30, 2020~~March 31, 2021 compared to the three months ended ~~September 30, 2019,~~March 31, 2020, interest income on loans decreased ~~$10.7~~$8.6 million as a result of lower average interest rates on loans. The average yield on loans decreased from ~~5.41%~~5.15% during the three months ended ~~September 30, 2019,~~March 31, 2020, to ~~4.46%~~4.39% during the three months ended ~~September 30, 2020.~~March 31, 2021. This decrease was primarily due to decreased yields in most loan categories as a result of decreased LIBOR and Federal Funds interest rates. ~~In addition in the 2020 period, the Company originated $121 million of PPP loans, which have a much lower yield compared to the overall loan portfolio.~~ Interest income on loans increased ~~$4.0~~$2.2 million as the result of higher average loan balances, which increased from ~~$4.20~~$4.23 billion during the three months ended ~~September 30, 2019,~~March 31, 2020, to ~~$4.51~~$4.41 billion during the three months ended ~~September 30, 2020.~~March 31, 2021. The higher average balances were primarily due to organic loan growth in commercial business loans, ~~(including the PPP loans),~~ other residential (multi-family)~~, and one- to four-family residential~~ loans, ~~partially offset by decreases in outstanding construction and consumer loans.~~

During the nine months ended September 30, 2020 compared to the nine months ended September 30, 2019, interest income on loans decreased $21.5 million as a result of lower average interest rates on loans. The average yield on loans decreased from 5.41% during the nine months ended September 30, 2019, to 4.74% during the nine months ended September 30, 2020. This decrease was primarily due to decreased yields in most loan categories as a result of decreased LIBOR and Federal Funds interest rates during the nine months ended September 30, 2020. This decrease also includes PPP loans, which have a much lower yield compared to the overall loan portfolio. Interest income on loans increased $9.4 million as the result of higher average loan balances, which increased from $4.14 billion during the nine months ended September 30, 2019, to $4.38 billion during the nine months ended September 30, 2020. The higher average balances were primarily due to organic growth in commercial ~~business loans (including the PPP loans), other residential (multi-family)~~real estate loans and one- to four-family residential loans, partially offset by decreases in outstanding construction loans and consumer loans.

On an on-going basis, the Company has estimated the cash flows expected to be collected from ~~acquired~~FDIC-acquired loan pools. For each of the loan portfolios acquired, the cash flow estimates have increased, based on the payment histories and the collection of certain loans, thereby reducing loss expectations of certain loan pools, resulting in adjustments to be spread on a level-yield basis over the remaining expected lives of the loan pools. The entire amount of the discount adjustment has been and will be accreted to interest income over time. For the three months ended ~~September 30,~~March 31, 2021 and 2020, ~~and 2019,~~ the adjustments increased interest income by ~~$1.2~~$691,000 and $1.9 million, ~~and $2.3 million,~~ respectively. ~~For the nine months ended September 30, 2020 and 2019, the adjustments increased interest income by $4.6 million and $5.2 million, respectively.~~

As of ~~September 30, 2020,~~March 31, 2021, the remaining accretable yield adjustment that will affect interest income was ~~$2.9~~$1.3 million. Of the remaining adjustments affecting interest income, we expect to recognize ~~$932,000~~approximately $900,000 of interest income during the ~~fourth quarter~~remainder of 2021. As discussed in Note 6 of the Notes to Consolidated Financial Statements contained in this report, we adopted the new accounting standard related to accounting for credit losses as of January 1, 2021. With the adoption of this standard, there is no further reclassification of discounts from non-accretable to accretable subsequent to December 31, 2020. All adjustments made prior to January 1, 2021, will continue to be accreted to interest income. Apart from the yield accretion, the average yield on loans was ~~4.35%~~4.33% during the three months ended ~~September 30, 2020,~~March 31, 2021, compared to ~~5.20%~~4.97% during the three months ended ~~September 30, 2019,~~March 31, 2020, as a result of lower current market rates on adjustable rate loans and new loans originated during the past year. ~~Apart from the yield accretion, the average yield on loans was 4.60% during the nine months ended September 30, 2020, compared to 5.24% during the nine months ended September 30, 2019.~~

In October 2018, the Company entered into an interest rate swap transaction as part of its ongoing interest rate management strategies to hedge the risk of its floating rate loans. The notional amount of the swap was $400 million with a contractual termination date in October 2025. Under the terms of the swap, the Company received a fixed rate of interest of 3.018% and paid a floating rate of interest equal to one-month USD-LIBOR. The floating rate reset monthly and net settlements of interest due to/from the counterparty also occurred monthly. To the extent that the fixed rate exceeded one-month USD-LIBOR, the Company received net interest settlements, which were recorded as interest income on loans. If one-month USD-LIBOR exceeded the fixed rate of interest, the Company was required to pay net settlements to the counterparty and record those net payments as a reduction of interest income on loans. The Company recorded interest income related to the swap of $2.0 million and ~~$5.6~~$1.6 million, respectively, in the three ~~and nine~~ months ended ~~September 30,~~March 31, 2021 and 2020. ~~The Company recorded loan interest income related to this swap transaction of $801,000 and $1.9 million, respectively, in the three and nine months ended September 30, 2019.~~

OnIn March 2, 2020, the Company and its swap counterparty mutually agreed to terminate the $400 million interest rate swap ~~effective immediately.~~prior to its contractual maturity. The Company received a payment of $45.9 million ~~including accrued but unpaid interest,~~ from its swap counterparty as a result of this termination. This $45.9 million, less the accrued interest portion and net of deferred income taxes, is reflected in the Company’s stockholders’ equity as Accumulated Other Comprehensive Income and a portion of it will be accreted to interest income on loans monthly through the original contractual termination date of October 6, 2025. This will have the effect of reducing Accumulated Other Comprehensive Income and increasing Net Interest Income and Retained Earnings over the period. In each quarterly period, ~~commencing with the quarter ended June 30, 2020,~~ until the original contract termination date, the Company expects to record loan interest income related to this swap transaction of approximately $2.0 million, based on the termination values of the swap.

The Company currently expects to have an amount of eligible variable rate loans to continue to accrete this interest income in future periods. If this expectation changes and the amount of eligible variable rate loans decreases significantly, the Company may be required to recognize this interest income more rapidly.

Interest Income – Investments and Other Interest-earning Assets

Interest income on investments ~~increased $526,000~~decreased $266,000 in the three months ended ~~September 30, 2020~~March 31, 2021 compared to the three months ended ~~September 30, 2019.~~March 31, 2020. Interest income ~~increased $736,000~~decreased $485,000 as a result of lower average interest rates from 3.22% during the three months ended March 31, 2020, to 2.75% during the three month period ended March 31, 2021. Partially offsetting that decrease, was an

increase of $219,000 as a result of an increase in average balances from ~~$342.3~~$385.0 million during the three months ended ~~September 30, 2019,~~March 31, 2020, to ~~$449.4~~$414.7 million during the three months ended ~~September 30, 2020.~~March 31, 2021. Average balances of securities increased primarily due to purchases of agency multi-family mortgage-backed securities which have a fixed rate of interest with expected lives of ~~six~~four to ~~twelve~~ten years. These purchased securities fit with the Company’s current asset/liability management strategies. Interest income decreased $210,000 as a result of lower average interest rates from 2.94% during the three months ended September 30, 2019, to 2.71% during the three month period ended September 30, 2020.

Interest income on investments increased $2.0 million in the nine months ended September 30, 2020 compared to the nine months ended September 30, 2019. Interest income increased $2.5 million as a result of an increase in average balances from $310.2 million during the nine months ended September 30, 2019, to $422.7 million during the nine months ended September 30, 2020. Average balances of securities increased primarily due to purchases of agency multi-family mortgage-backed securities which have a fixed rate of interest with expected lives of six to twelve years. As noted above, these purchased securities fit with the Company’s current asset/liability management strategies. Interest income decreased $459,000 as a result of lower average interest rates from 3.10% during the nine months ended September 30, 2019, to 2.92% during the nine month period ended September 30, 2020.

Interest income on other interest-earning assets decreased ~~$364,000~~$154,000 in the three months ended ~~September 30, 2020~~March 31, 2021 compared to the three months ended ~~September 30, 2019.~~March 31, 2020. Interest income decreased ~~$685,000, primarily~~$414,000 as a result of ~~the~~a decrease in average interest rates to ~~0.09%~~0.10% during the three months ended ~~September 30, 2020~~March 31, 2021 compared to ~~2.13%~~1.16% during the three months ended ~~September 30, 2019.~~March 31, 2020. Market interest rates earned on balances held at the Federal Reserve Bank were significantly lower in the ~~2020~~2021 period due to significant reductions in the federal funds rate of interest. Partially offsetting this decrease, interest income increased ~~$321,000, primarily~~$260,000 as a result of ~~the~~an increase in average balances from ~~$79.3~~$90.1 million during the three months ended ~~September 30, 2019,~~March 31, 2020, to ~~$270.5~~$419.4 million during the three months ended ~~September 30, 2020.~~March 31, 2021. Excess liquidity, after repayment of FHLBank borrowings, was maintained at the Federal Reserve Bank as a result of the significant increase in deposits ~~during the three months ended September 30,~~since March 31, 2020.

Interest income on other interest-earning assets decreased $1.1 million in the nine months ended September 30, 2020 compared to the nine months ended September 30, 2019. Interest income decreased $2.1 million, primarily as a result of the decrease in average interest rates to 0.24% during the nine months ended September 30, 2020 compared to 2.32% during the nine months ended September 30, 2019. Market interest rates earned on balances held at the Federal Reserve Bank were significantly lower in the 2020 period due to significant reductions in the federal funds rate of interest. Partially offsetting this decrease, interest income increased $1.0 million, primarily as a result of the increase in average balances from $87.2 million during the nine months ended September 30, 2019, to $227.5 million during the nine months ended September 30, 2020.

Total Interest Expense

Total interest expense decreased ~~$4.8~~$6.0 million, or ~~33.9%~~47.8%, during the three months ended ~~September 30, 2020,~~March 31, 2021, when compared with the three months ended ~~September 30, 2019,~~March 31, 2020, due to a decrease in interest expense on deposits of ~~$4.7~~$6.4 million, or ~~39.8%~~60.1%, a decrease in interest expense on short-term borrowings and repurchase agreements of ~~$1.1 million,~~$640,000, or ~~99.3%~~98.6%, and a decrease in interest expense on subordinated debentures issued to capital trust of ~~$125,000,~~$103,000, or ~~49.4%~~47.7%, partially offset by an increase in interest expense on subordinated notes of $1.1 million, or ~~101.0%~~101.1%.

Total interest expense decreased $8.3 million, or 20.3%, during the nine months ended September 30, 2020, when compared with the nine months ended September 30, 2019, due to a decrease in interest expense on deposits of $7.1 million, or 21.1%, a decrease in interest expense on short-term borrowings and repurchase agreements of $2.2 million, or 77.0%, and a decrease in interest expense on subordinated debentures issued to capital trust of $276,000, or 35.1%, partially offset by an increase in interest expense on subordinated notes of $1.4 million, or 41.1%.

Interest Expense – Deposits

Interest expense on demand deposits decreased ~~$893,000~~$1.6 million due to average rates of interest that decreased from 0.54% in the three months ended ~~September 30, 2019~~March 31, 2020 to ~~0.33%~~0.22% in the three months ended ~~September 30, 2020.~~March 31, 2021. Partially offsetting this decrease, interest expense on demand deposits increased ~~$513,000,~~$632,000, due to an increase in average balances from ~~$1.50~~$1.58 billion during the three months ended ~~September 30, 2019~~March 31, 2020 to ~~$1.96~~$2.19 billion during the three months ended ~~September 30, 2020.~~March 31, 2021. The Company experienced increased balances in ~~ICS reciprocal balances,~~various types of money market accounts and certain types of NOW accounts.

Interest expense on demand deposits decreased $1.1 million due to average rates of interest that decreased from 0.51% in the nine months ended September 30, 2019 to 0.42% in the nine months ended September 30, 2020. Partially offsetting this decrease, interest expense on demand deposits increased $1.0 million due to an increase in average balances from $1.49 billion for the nine months ended September 30, 2019 to $1.79 billion for the nine months ended September 30, 2020. The Company experienced increased balances in ICS reciprocal balances, money market accounts and certain types of NOW accounts.

Interest expense on time deposits decreased ~~$3.7~~$3.8 million as a result of a decrease in average rates of interest from ~~2.24%~~1.99% during the three months ended ~~September 30, 2019,~~March 31, 2020, to ~~1.35%~~0.94% during the three months ended ~~September 30, 2020.~~March 31, 2021. Interest expense on time deposits also decreased ~~$668,000~~$1.7 million due to a decrease in average balances of time deposits from ~~$1.73~~$1.71 billion during the three months ended ~~September 30, 2019~~March 31, 2020 to ~~$1.60~~$1.31 billion in the three months ended ~~September 30, 2020.~~March 31, 2021. A large portion of the Company’s certificate of deposit portfolio matures within six to eighteen months and therefore reprices fairly quickly; this is consistent with the portfolio over the past several years. Older certificates of deposit that renewed or were replaced with new deposits generally resulted in the Company paying a lower rate of interest due to market interest rate decreases throughout 2020. Market interest rates remained low during the ~~latter portion of 2019 and throughout 2020. In the~~first three months ~~ended September 30, 2020, the~~of 2021. The decrease in average balances of time deposits was a result of decreases in both retail customer time deposits obtained through on-line channels and decreases in brokered deposits, primarily those added through the CDARS program purchased ~~funds~~. funds.

Interest expense on time deposits decreased $6.9 million as a result of a decrease in average rates of interest from 2.20% during the nine months ended September 30, 2019, to 1.66% during the nine months ended September 30, 2020. Interest expense on time deposits decreased $168,000 due to a decrease in average balances of time deposits from $1.71 billion during the nine months ended September 30, 2019 to $1.70 billion in the nine months ended September 30, 2020. A large portion of the Company’s certificate of deposit portfolio matures within six to eighteen months and therefore reprices fairly quickly; this is consistent with the portfolio over the past several years. Older certificates of deposit that renewed or were replaced with new deposits generally resulted in the Company paying a lower rate of interest due to market interest rate decreases during the latter portion of 2019 and through the first half of 2020. In the nine months ended September 30, 2020, the decrease in average balances of time deposits was a result of decreases in both retail customer time deposits obtained through on-line channels and decreases in ~~brokered deposits, primarily those added through the CDARS program purchased funds~~.

Interest Expense – FHLBank Advances, Short-term Borrowings and Repurchase Agreements, Subordinated Debentures Issued to Capital Trusts and Subordinated Notes

FHLBank advances were not utilized during the three ~~and nine~~ months ended ~~September 30, 2020~~March 31, 2021 and ~~2019.~~2020. Overnight borrowings from the FHLBank also were not utilized during the three ~~and nine~~ months ended ~~September 30, 2019~~March 31, 2021 and ~~are included in short-term borrowings.~~

2020.

Interest expense on short-term borrowings and repurchase agreements decreased ~~$766,000~~$438,000 due to a decrease in average rates from ~~1.54%~~0.99% in the three months ended ~~September 30, 2019~~March 31, 2020 to ~~0.02%~~0.03% in the three months ended ~~September 30, 2020.~~March 31, 2021. The decrease was due to a decrease in market interest rates during the ~~period and the lower interest rate charged on overnight FHLBank borrowings.~~period. Interest expense on short-term borrowings and repurchase agreements also decreased ~~$349,000~~$202,000 due to a decrease in average balances from ~~$289.2~~$265.1 million during the three months ended ~~September 30, 2019~~March 31, 2020 to ~~$159.4~~$146.1 million during the three months ended ~~September 30, 2020,~~March 31, 2021, which was primarily due to changes in the Company’s funding needs and the mix of funding, which can fluctuate. ~~Overnight borrowings from the FHLBank were not utilized during the three months ended September 30, 2020.~~

Interest expense on short-term borrowings and repurchase agreements decreased $1.6 million due to a decrease in average rates from 1.47% in the nine months ended September 30, 2019 to 0.46% in the nine months ended September 30, 2020. The decrease was due to a decrease in market interest rates during the period and the lower interest rate charged on overnight FHLBank borrowings. Interest expense on short-term borrowings and repurchase agreements also decreased $612,000 due to a decrease in average balances from $264.1 million during the nine months ended September 30, 2019 to $195.5 million during the nine months ended September 30, 2020, which was primarily due to changes in the Company’s funding needs and the mix of funding, which can fluctuate. Overnight borrowings from the FHLBank were utilized much less often during the nine months ended September 30, 2020.

During the three months ended ~~September 30, 2020,~~March 31, 2021, compared to the three months ended ~~September 30, 2019,~~March 31, 2020, interest expense on subordinated debentures issued to capital trusts decreased ~~$125,000~~$103,000 due to lower average interest rates. The average interest rate was ~~3.90%~~

1.78% in the three months ended ~~September 30, 2019~~March 31, 2021 compared to ~~1.98%~~3.37% in the three months ended ~~September 30,~~March 31, 2020. The subordinated debentures are variable-rate debentures which bear interest at an average rate of three-month LIBOR plus 1.60%, adjusting quarterly, which was ~~1.85%~~1.81% at ~~September 30, 2020.~~March 31, 2021. There was no change in the average balance of the subordinated debentures between the ~~2019~~2020 and the ~~2020~~2021 periods.

During the nine months ended September 30, 2020, compared to the nine months ended September 30, 2019, interest expense on subordinated debentures issued to capital trusts decreased $276,000 due to lower average interest rates. The average interest rate was 4.08% in the nine months ended September 30, 2019 compared to 2.65% in the nine months ended September 30, 2020. There was no change in the average balance of the subordinated debentures between the 2019 and the 2020 periods.

In August 2016, the Company issued $75.0 million of 5.25% fixed-to-floating rate subordinated notes due August 15, 2026. The notes were sold at par, resulting in net proceeds, after underwriting discounts and commissions and other issuance costs, of approximately $73.5 million. In June 2020, the Company issued $75.0 million of 5.50% fixed-to-floating rate subordinated notes due June 15, 2030. The notes were sold at par, resulting in net proceeds, after underwriting discounts and commissions and other issuance costs, of approximately $73.5 million. In both cases, these issuance costs are amortized over the expected life of the notes, which is five years from the issuance date, ~~and therefore impact~~impacting the overall interest expense on the notes. During the three months ended ~~September 30, 2020,~~March 31, 2021, compared to the three months ended ~~September 30, 2019,~~March 31, 2020, interest expense on subordinated notes increased $1.1 million ~~primarily~~ due to ~~the~~ higher average balances ~~due to~~resulting from the issuance of new notes in the three months ended June 30, 2020. Interest expense on subordinated notes increased $16,000 due to slightly higher average interest rates. The ~~increase of $1.3 million~~average interest rate was 6.01% in the ~~nine-month period was for~~three months ended March 31, 2021 compared to 5.92% in the ~~same reason as stated for the three-month period.~~three months ended March 31, 2020.

Net Interest Income

Net interest income for the three months ended ~~September 30, 2020~~March 31, 2021 decreased ~~$1.7 million~~$849,000 to ~~$44.2~~$44.1 million compared to ~~$45.9~~$44.9 million for the three months ended ~~September 30, 2019.~~March 31, 2020. Net interest margin was ~~3.36%~~3.41% in the three months ended ~~September 30, 2020,~~March 31, 2021, compared to ~~3.95%~~3.84% in the three months ended ~~September 30, 2019,~~March 31, 2020, a decrease of 5943 basis points, or ~~14.9%~~11.2%. In both three month periods, the Company’s net interest income and margin were positively impacted by the increases in expected cash flows from the FDIC-assisted acquired loan pools and the resulting increase to accretable yield, which were previously discussed in Note 7 of the Notes to Consolidated Financial Statements. The positive impact of these changes in the three months ended ~~September 30,~~March 31, 2021 and 2020 ~~and 2019~~ were increases in interest income of ~~$1.2 million~~$691,000 and ~~$2.3~~$1.9 million, respectively, and increases in net interest margin of 9five basis points and 2016 basis points, respectively. Excluding the positive impact of the additional yield accretion, in the three months ended ~~September 30, 2020,~~March 31, 2021, net interest margin decreased 4833 basis points when compared to the year-ago three month period. ~~The decrease was partially due to lower market~~Most of the net interest ~~rates, which caused lower LIBOR interest rates and generally resulted in lower yields on loans and other interest-earning assets. The~~ margin decrease ~~also~~ resulted from ~~an increase~~changes in ~~interest-earning assets that were primarily at rates that were much lower than~~ the ~~then-current portfolio rates. Increases included $311 million in~~asset mix, with average ~~loan balances ($120 million of which were PPP loans), $191 million in average interest-earning~~ cash equivalents ~~balances~~increasing $329 million and ~~$107 million in~~ average investment securities ~~balances. In addition,~~increasing $30 million. The average yield on cash equivalents decreased 106 basis points between the 2021 and 2020 periods. Also in comparing the 2021 and 2020 periods, the average yield on loans decreased 76 basis points while the average rate on deposits declined 80 basis points. This change in asset mix represents approximately 24 basis points of the decrease, with the additional subordinated notes issued in June 2020 ~~reduced net interest income by approximately $1.1 million in the third quarter of 2020.~~

Net interest income for the nine months ended September 30, 2020 decreased $2.9 million to $132.6 million compared to $135.5 million for the nine months ended September 30, 2019. Net interest margin was 3.52% in the nine months ended September 30, 2020, compared to 3.99% in the nine months ended September 30, 2019, a decrease of 47representing eight basis points, or 11.8%. In both nine month periods, the Company’s net interest income and margin were positively impacted by the increases in expected cash flows from the FDIC-assisted acquired loan pools and the resulting increase to accretable yield, which were previously discussed in ~~Note 7~~ of the Notes to Consolidated Financial Statements. The positive impact of these changes in the nine months ended September 30, 2020 and 2019 were increases in interest income of $4.6 million and $5.2 million, respectively, and increases in net interest margin of 12 basis points and 15 basis points, respectively. Excluding the positive impact of the additional yield accretion, in the nine months ended September 30, 2020, net interest margin decreased 44 basis points when compared to the year-ago nine month period. The decrease was partially due to lower market interest rates, which caused lower LIBOR interest rates and generally resulted in lower yields on loans and other interest-earning assets. The margin decrease also resulted from an increase in average interest-earning assets that were primarily at rates that were much lower than the then-current portfolio rates, as described above.

points.

The ~~Company's~~Company’s overall average interest rate spread decreased 4931 basis points, or ~~13.6%~~8.7%, from ~~3.61%~~3.54% during the three months ended ~~September 30, 2019~~March 31, 2020 to ~~3.12%~~3.23% during the three months ended ~~September 30, 2020.~~March 31, 2021. The decrease was due to a ~~109~~100 basis point decrease in the weighted average yield on interest-earning assets, partially offset by a 6069 basis point decrease in the weighted average rate paid on interest-bearing liabilities. In comparing the two periods, the yield on loans decreased 9576 basis points, the yield on investment securities decreased 2347 basis points and the yield on other interest-earning assets decreased ~~204~~106 basis points. The rate paid on deposits decreased 6680 basis points, the rate paid on short-term borrowings and repurchase agreements decreased ~~152~~96 basis points, the rate paid on subordinated debentures issued to capital trusts decreased ~~192~~159 basis points, and the rate paid on subordinated notes increased ~~five~~nine basis points.

The Company's overall average interest rate spread decreased 42 basis points, or 11.5%, from 3.66% during the nine months ended September 30, 2019 to 3.24% during the nine months ended September 30, 2020. The decrease was due to an 81 basis point decrease in the weighted average yield on interest-earning assets, partially offset by a 39 basis point decrease in the weighted average rate paid on interest-bearing liabilities. In comparing the two periods, the yield on loans decreased 67 basis points, the yield on investment securities decreased 18 basis points and the yield on other interest-earning assets decreased 208 basis points. The rate paid on deposits decreased 39 basis points, the rate paid on short-term borrowings and repurchase agreements decreased 101 basis points, the rate paid on subordinated debentures issued to capital trusts decreased 143 basis points, and the rate paid on subordinated notes increased one basis point.

For additional information on net interest income components, refer to the ~~"Average~~“Average Balances, Interest Rates and ~~Yields"~~Yields” tables in this Quarterly Report on Form 10-Q.

Provision ~~for Loan Losses~~ and Allowance for ~~Loan~~Credit Losses

InThe Company adopted ASU 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, effective January 1, 2021. The CECL methodology replaces the ~~first quarter~~incurred loss methodology with a lifetime “expected credit loss” measurement objective for loans, held-to-maturity debt securities and other receivables measured at amortized cost at the time the financial asset is originated or acquired. This standard requires the consideration of ~~2020, pursuant to the CARES Act~~historical loss experience and ~~guidance from the SEC~~current conditions adjusted for reasonable and ~~FASB, we elected to delay adoption of the new accounting standard (CECL) related to accounting for credit losses.~~supportable economic forecasts. Our 2020 financial statements ~~for the three and nine months ended September 30, 2020,~~ are prepared under the ~~existing~~ incurred loss methodology standard. Upon adoption of the CECL accounting standard, ~~for accounting for loan losses.~~

~~Management records a provision for loan losses in an amount it believes is sufficient to result in an~~we increased the balance of our allowance for ~~loan~~credit losses ~~that will cover~~related to outstanding loans by $11.6 million and created a liability for potential losses related to the unfunded portion of our loans and commitments of approximately $8.7 million. The after-tax effect reduced our retained earnings by approximately $14.2 million. The adjustment was based upon the Company’s analysis of current ~~net charge-offs~~conditions, assumptions and economic forecasts at

January 1, 2021. ASC 326 requires enhanced disclosures related to the significant estimates and judgments used in estimating credit losses as well as ~~risks believed to be inherent in~~ the ~~loan portfolio~~credit quality and underwriting standards of a company’s portfolio.

Management estimates the ~~Bank. The amount of provision charged against current income is based on several factors, including, but not limited~~allowance balance using relevant available information, from internal and external sources, relating to past events, current conditions, and reasonable and supportable forecasts. Historical credit loss experience provides the basis for the estimation of expected credit losses. Adjustments to historical loss information are made for differences in current loan-specific risk characteristics such as differences in underwriting standards, portfolio mix, ~~actual and potential losses identified in the loan portfolio, economic conditions, and internal~~delinquency level, or term as well as ~~external reviews. The levels of non-performing assets, potential problem loans, loan loss provisions~~for changes in environmental conditions, such as changes in the national unemployment rate, commercial real estate price index, housing price index and ~~net charge-offs fluctuate from period to period and are difficult to predict.~~

national retail sales index.

Worsening economic conditions from the COVID-19 pandemic, higher inflation or interest rates, or other factors may lead to increased losses in the portfolio and/or requirements for an increase in ~~loan loss~~ provision expense. Management maintains various controls in an attempt to limit future losses, such as a watch list of possible problem loans, documented loan administration policies and loan review staff to review the quality and anticipated collectability of the portfolio. Additional procedures provide for frequent management review of the loan portfolio based on loan size, loan type, delinquencies, financial analysis, on-going correspondence with borrowers and problem loan work-outs. Management determines which loans are potentially uncollectible, or represent a greater risk of loss, and makes additional provisions to expense, if necessary, to maintain the allowance at a satisfactory level.

The provision for ~~loan~~credit losses on loans for the three months ended ~~September 30, 2020~~March 31, 2021 was ~~$4.5 million~~$300,000 compared with ~~$2.0~~$3.9 million for the three months ended ~~September 30, 2019. The provision for loan losses for~~March 31, 2020. In the ~~nine~~three months ended ~~September 30, 2020 was $14.4 million compared with $5.5 million for~~March 31, 2021, the ~~nine months ended September 30, 2019.~~Company experienced net recoveries of $64,000. Total net charge-offs were ~~$63,000 and $798,000~~$237,000 for the three months ended ~~September 30, 2020~~March 31, 2020. The provision for losses on unfunded commitments for the quarter ended March 31, 2021 was a credit of $674,000, as the level and ~~2019, respectively. During the three months ended September 30, 2020,~~mix of unfunded commitments resulted in a ~~substantial portion of the net charge-offs were~~decrease in the ~~consumer category. Total net charge-offs were $427,000 and $3.5 million~~required reserve for the nine months ended September 30, 2020 and 2019, respectively. During the nine months ended September 30, 2020, a substantial portion of net charge-offs were in the consumer category. The Company experienced net recoveries in some of the other loan categories.such potential losses. We have seen and expect to continue to see rapid reductions in the outstanding automobile loan balance as we determined in February 2019 to cease providing indirect lending services to automobile dealerships. At ~~September 30, 2020,~~March 31, 2021, indirect automobile loans totaled approximately ~~$60~~$38 million. ~~We expect this balance will be largely paid off in the next two years.~~ General market conditions and unique circumstances related to specific industries and individual projects contributed to the level of provisions and charge-offs. Collateral and repayment evaluations of all assets categorized as potential problem loans, non-performing loans or foreclosed assets were completed with corresponding charge-offs or reserve allocations made as appropriate.

All FDIC-acquired loans were grouped into pools based on common characteristics and were recorded at their estimated fair values, which incorporated estimated credit losses at the acquisition date. These loan pools have been systematically reviewed by the Company to determine the risk of losses that may exceed those identified at the time of the acquisition. Techniques used in determining risk of loss are similar to those used to determine the risk of loss for the legacy Great Southern Bank portfolio, with most focus being placed on those loan pools which include the larger loan relationships and those loan pools which exhibit higher risk characteristics. Review of the acquired loan portfolio also includes review of financial information, collateral valuations and customer interaction to determine if additional reserves are warranted.

The Bank’s allowance for ~~loan~~credit losses as a percentage of total loans ~~excluding FDIC-assisted acquired loans,~~ was ~~1.24%~~1.56% and ~~1.00%~~1.32% at ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019,~~2020, respectively. Prior to January 1, 2021, the ratio excluded the FDIC-assisted acquired loans. Management considers the allowance for ~~loan~~credit losses adequate to cover losses inherent in the Bank’s loan portfolio at ~~September 30, 2020,~~March 31, 2021, based on recent reviews of the Bank’s loan portfolio and current economic conditions. If challenging economic conditions were to last longer than anticipated or deteriorate further or management’s assessment of the loan portfolio were to change, ~~it is expected that~~ additional loan loss provisions ~~would~~could be required, thereby adversely affecting the Company’s future results of operations and financial condition.

Non-performing Assets

Non-performing assets acquired through FDIC-assisted transactions, including foreclosed assets and potential problem loans, are not included in the totals or in the discussion of non-performing loans, potential problem loans and foreclosed assets below. These assets were initially recorded at their estimated fair values as of their acquisition dates and are accounted for in pools. Therefore, these loan pools are analyzed rather than the individual loans. The overall performance of the loan pools acquired in each of the five FDIC-assisted transactions has been better than original expectations as of the acquisition dates.

As a result of changes in balances and composition of the loan portfolio, changes in economic and market conditions and other factors specific to a borrower’s circumstances, the level of non-performing assets will fluctuate.

~~Non-performing~~At March 31, 2021, non-performing assets, ~~excluding all FDIC-assisted acquired~~including FDIC-acquired assets, ~~at September 30, 2020~~ were ~~$5.5~~$10.9 million, ~~a decrease~~an increase of ~~$2.7~~$2.8 million from ~~$8.2~~$8.1 million at December 31, ~~2019.~~2020. Non-performing ~~assets, excluding all FDIC-assisted acquired~~ assets as a percentage of total assets were ~~0.10%~~0.19% at ~~September 30, 2020~~March 31, 2021 and ~~0.16%~~0.15% at December 31, ~~2019.~~ 2020. At March 31, 2021, non-performing assets, excluding all FDIC-acquired assets, were $6.7 million, an increase of $2.9 million from $3.8 million at December 31, 2020. Excluding all FDIC-acquired assets, non-performing assets as a percentage of total assets were 0.12% at March 31, 2021, compared to 0.07% at December 31, 2020.

Compared to December 31, ~~2019,~~2020, and excluding all FDIC-acquired loans, non-performing loans ~~decreased $682,000~~increased $3.0 million to ~~$3.8~~$6.0 million at ~~September 30, 2020,~~March 31, 2021, and foreclosed assets decreased ~~$2.0~~$73,000 to $704,000 at March 31, 2021. Including all FDIC-acquired loans, when compared to December 31, 2020, non-performing loans increased $2.7 million to ~~$1.6~~$9.5 million at ~~September 30, 2020.~~March 31, 2021, and foreclosed assets increased $96,000 to $1.3 million at March 31, 2021. Non-performing one- to four-family residential loans comprised ~~$2.2~~$4.2 million, or ~~56.3%~~44.2%, of the total non-performing loans at ~~September 30, 2020, an increase~~March 31, 2021, a decrease of ~~$683,000~~$242,000 from December 31, ~~2019.~~2020. The majority of the non-performing FDIC-acquired loans are in the one- to four-family category. Non-performing ~~consumer~~commercial real estate loans comprised ~~$836,000,~~$3.4 million, or ~~21.8%~~35.6%, of the total non-performing loans at ~~September 30, 2020, a decrease~~March 31, 2021, an increase of ~~$339,000~~$2.5 million from December 31, ~~2019.~~2020. Non-performing ~~commercial real estate~~consumer loans comprised ~~$701,000,~~$1.0 million, or ~~18.3%~~10.7%, of the total non-performing loans at ~~September 30, 2020, an increase~~March 31, 2021, a decrease of ~~$69,000~~$252,000 from December 31, ~~2019.~~2020. Non-performing ~~commercial business~~construction and land development loans comprised ~~$140,000,~~$622,000, or ~~3.6%~~6.5%, of the total non-performing loans at ~~September 30, 2020,~~March 31, 2021, all of which was added during the three months ended March 31, 2021. Non-performing commercial business loans comprised $106,000, or 1.1%, of the total non-performing loans at March 31, 2021, a decrease of ~~$1.1 million~~$8,000 from December 31, ~~2019.~~ 2020.

Non-performing Loans.Activity in the non-performing loans category during the ~~nine~~three months ended ~~September 30, 2020~~March 31, 2021 was as follows:

Beginning
Balance,
January 1

Additions
to Non-
Performing

Removed
from Non-
Performing

Transfers to
Potential
Problem
Loans

Transfers to
Foreclosed
Assets and
Repossessions

Charge-
Offs

Payments

Ending
Balance,
September 30

(In Thousands)
One- to four-family
construction
$
—

$
—

$
—

$
—

$
—

$
—

$
—

$
—
Subdivision construction

—

—

—

—

—

—

—

—
Land development

—

—

—

—

—

—

—

—
Commercial construction

—

—

—

—

—

—

—

—
One- to four-family
residential

1,477

1,245

—

(143
)

—

—

(419
)

2,160
Other residential

—

—

—

—

—

—

—

—
Commercial real estate

632

107

—

—

—

—

(38
)

701
Commercial business

1,235

—

—

—

—

—

(1,095
)

140
Consumer

1,175

370

—

(85
)

(89
)

(164
)

(371
)

836

Total
$
4,519

$
1,722

$
—

$
(228
)
$
(89
)
$
(164
)
$
(1,923
)
$
3,837


							Transfers to		Transfers to
	Beginning		Additions		Removed		Potential		Foreclosed						Ending
	Balance,		to Non-		from Non-		Problem		Assets and		Charge-				Balance,
	January 1		Performing		Performing		Loans		Repossessions		Offs		Payments		March 31

	(In Thousands)
One- to four-family construction	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Subdivision construction		—		—		—		—		—		—		—		—
Land development		—		622		—		—		—		—		—		622
Commercial construction		—		—		—		—		—		—		—		—
One- to four-family residential		4,465		359		—		—		(183)		(5)		(413)		4,223
Other residential		190		—		—		—		—		—		(5)		185
Commercial real estate		849		2,556		—		—		—		—		(11)		3,394
Commercial business		114		—		—		—		—		—		(8)		106
Consumer		1,268		189		(179)		—		(28)		(113)		(121)		1,016
Total non-performing loans		6,886		3,726		(179)		—		(211)		(118)		(558)		9,546
Less: FDIC-acquired loans		3,843		85		—		—		(183)		(65)		(104)		3,576

Total non-performing loans net of FDIC-acquired loans	$	3,043	$	3,641	$	(179)	$	—	$	(28)	$	(53)	$	(454)	$	5,970

At ~~September 30, 2020,~~March 31, 2021, the non-performing one- to four-family residential category included 2965 loans, 12four of which were added during ~~2020.~~2021. The largest relationship in the category totaled ~~$276,000,~~$344,000, or ~~12.8%~~8.1% of the total category. The non-performing commercial real estate category included ~~three~~six loans, ~~one~~two of which ~~was~~were added during ~~2020.~~2021. The largest relationship in the category was added during the period and totaled ~~$511,000,~~$2.4 million, or ~~73.0%~~69.4% of the total ~~category, and~~category. It is ~~primarily related to~~collateralized by a ~~multi-tenant~~medical office building in Arkansas. The non-performing commercial business category included two loans, neither of which was added during 2020. The previous largest relationship in this category, which was added during 2018 and totaled $1.0 million, paid off during the ~~three months ended September 30, 2020.~~Chicago, Ill., area. The non-performing consumer category included 7760 loans, 2316 of which were added in ~~2020,~~2021, and the majority of which are indirect and used automobile loans. The non-performing land development category consisted of one loan, which totaled $622,000 and was added during 2021, and is collateralized by unimproved zoned vacant ground in southern Illinois.

In the table above, loans that were modified under the guidance provided by the CARES Act are not non-performing loans as they are current under their modified terms. For additional information about these loan modifications, see the “Loan Modifications” section of this report.

Potential Problem Loans.Compared to December 31, ~~2019,~~2020, and excluding all FDIC-acquired loans, potential problem loans decreased ~~$753,000, or 17.2%,~~$720,000 to $3.6 million at ~~September 30, 2020.~~March 31, 2021. Compared to December 31, 2020, potential problem loans, including the FDIC-assisted acquired loans, decreased $757,000, or 12.9%, to $5.1 million at March 31, 2021. This decrease was primarily due to payments of ~~$1.6 million~~$123,000 on potential problem loans, ~~$119,000~~$576,000 in loans ~~transferred to non-performing loans, $59,000~~upgraded and removed from the potential problem loan category, $34,000 in loans transferred to foreclosed assets and repossessions, and ~~$102,000~~$44,000 in loan write-downs, partially offset by ~~$1.1 million~~$21,000 in loans added to potential problem loans. Potential problem loans are loans which management has identified through routine internal review procedures as having possible credit problems that may cause the borrowers difficulty in complying with the current repayment terms. These loans are not reflected in non-performing ~~assets, but are considered in determining the adequacy of the allowance for loan losses.~~ assets.

Due to the ~~deteriorating~~continued economic ~~conditions from~~uncertainty associated with COVID-19, it is possible that we could experience an increase in potential problem loans induring the remainder of ~~2020.~~2021. As noted, we experienced an increased level of loan modifications in late March through June 2020; however, loan modifications ~~were much lower at September 30, 2020 compared~~have continued to ~~June 30, 2020.~~trend down through March 31, 2021. In accordance with the CARES Act and guidance from the banking regulatory agencies, we made certain short-term modifications to loan terms to help our customers navigate through the current pandemic situation. Although loan modifications were made, they did not result in these loans being classified as ~~troubled debt restructurings,~~TDRs, potential problem loans or non-performing loans. If more severe or lengthier negative impacts of the COVID-19 pandemic occur or the effects of the SBA loan programs and other loan and stimulus programs do not enable companies and individuals to completely recover financially, this could result in longer-term modifications, which may be deemed to be ~~troubled debt restructurings,~~TDRs, additional potential problem loans and/or additional non-performing loans. Further actions on our part, including additions to the allowance for ~~loan~~credit losses, could result.

Activity in the potential problem loans categories during the ~~nine~~three months ended ~~September 30, 2020,~~March 31, 2021, was as follows:

Beginning
Balance,
January 1

Additions
to Potential
Problem

Removed
from
Potential
Problem

Transfers to
Non-
Performing

Transfers to
Foreclosed
Assets and
Repossessions

Charge-
Offs

Payments

Ending
Balance,
September 30

(In Thousands)
One- to four-family
  construction
$
—

$
—

$
—

$
—

$
—

$
—

$
—

$
—
Subdivision
   construction

—

24

—

—

—

—

(2
)

22
Land development

—

—

—

—

—

—

—

—
Commercial
   construction

—

—

—

—

—

—

—

—
One- to four-family
   residential

791

143

—

(83
)

—

—

(138
)

713
Other residential

—

—

—

—

—

—

—

—
Commercial real estate

3,078

559

—

—

—

—

(1,282
)

2,355
Commercial business

—

—

—

—

—

—

—

—
Consumer

512

401

—

(36
)

(59
)

(102
)

(178
)

538

Total
$
4,381

$
1,127

$
—

$
(119
)
$
(59
)
$
(102
)
$
(1,600
)
$
3,628


					Removed				Transfers to
	Beginning		Additions		from		Transfers to		Foreclosed						Ending
	Balance,		to Potential		Potential		Non-		Assets and		Charge-				Balance,
	January 1		Problem		Problem		Performing		Repossessions		Offs		Payments		March 31

	(In Thousands)
One- to four-family construction	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Subdivision construction		21		—		—		—		—		—		(2)		19
Land development		—		—		—		—		—		—		—		—
Commercial construction		—		—		—		—		—		—		—		—
One- to four-family residential		2,157		—		—		—		—		—		(48)		2,109
Other residential		—		—		—		—		—		—		—		—
Commercial real estate		3,080		—		(554)		—		—		—		(12)		2,514
Commercial business		—		—		—		—		—		—		—		—
Consumer		588		21		(22)		(1)		(34)		(44)		(61)		447
Total potential problem loans		5,846		21		(576)		(1)		(34)		(44)		(123)		5,089
Less: FDIC-acquired loans		1,523		—		—		—		—		—		(37)		1,486

Total potential problem loans net of FDIC-acquired loans	$	4,323	$	21	$	(576)	$	(1)	$	(34)	$	(44)	$	(86)	$	3,603

At ~~September 30, 2020,~~March 31, 2021, the commercial real estate category of potential problem loans included ~~two~~three loans, ~~one~~none of which ~~was~~were added during ~~the three months ended September 30, 2020.~~2021. The largest relationship in this category (added during 2018), which totaled $1.8 million, or ~~76.3%~~70.3% of the total category, is collateralized by a mixed use commercial retail ~~building. The other relationship~~building in ~~the category (previously mentioned, added this quarter), which totaled $559,000, or 23.7% of the total category, is collateralized by a restaurant building.~~St. Louis, Mo. Payments were current on ~~both relationships~~this relationship at ~~September 30, 2020. The previous other relationship~~March 31, 2021. A single loan of $554,000 in ~~this~~the commercial real estate category ~~which~~of potential problem loans was ~~added during 2019 and totaled $1.1 million, paid off during the quarter ended September 30, 2020.~~upgraded to performing after six months of consecutive payments. The one- to four-family residential category of potential problem loans included ~~17 loans.~~33 loans, none of which were added during 2021. The largest relationship in this category totaled $320,000, or 14.8% of the total category. The consumer category of potential problem loans included 5836 loans, five of which were added during 2021, the majority of which are indirect and used automobile loans.

Other Real Estate Owned and Repossessions. Of the total ~~$3.0~~$1.9 million of other real estate owned and repossessions at ~~September 30, 2020, $446,000 represents the fair value of foreclosed and repossessed assets related to loans acquired in FDIC-assisted transactions and $940,000~~March 31, 2021, $532,000 represents properties which were not acquired through foreclosure. The foreclosed and other assets acquired in the FDIC-assisted transactions and the properties not acquired through foreclosure are not included in the following table and discussion of other real estate owned and repossessions.

Activity in other real estate owned and repossessions during the ~~nine~~three months ended ~~September 30, 2020,~~March 31, 2021, was as follows:


	Beginning										Ending
	Balance,						Capitalized		Write-		Balance,
	January 1		Additions		Sales		Costs		Downs		March 31

	(In Thousands)

One- to four-family construction	$	—	$	—	$	—	$	—	$	—	$	—
Subdivision construction		263		—		—		—		(94)		169
Land development		682		—		—		—		—		682
Commercial construction		—		—		—		—		—		—
One- to four-family residential		125		182		(14)		—		—		293
Other residential		—		—		—		—		—		—
Commercial real estate		—		—		—		—		—		—
Commercial business		—		—		—		—		—		—
Consumer		153		263		(241)		—		—		175
Total foreclosed assets and repossessions		1,223		445		(255)		—		(94)		1,319
Less: FDIC acquired assets		446		183		(14)		—		—		615

Total foreclosed assets and repossessions net of FDIC-acquired assets	$	777	$	262	$	(241)	$	—	$	(94)	$	704

Beginning
Balance,
January 1

Additions

Sales

Capitalized
Costs

Write-
Downs

Ending
Balance,
September 30

(In Thousands)
One- to four-family construction
$
—

$
—

$
—

$
—

$
—

$
—
Subdivision construction

689

—

(455
)

126

(10
)

350
Land development

1,816

—

(365
)

—

(376
)

1,075
Commercial construction

—

—

—

—

—

—
One- to four-family residential

601

—

(601
)

—

—

—
Other residential

—

—

—

—

—

—
Commercial real estate

—

—

—

—

—

—
Commercial business

—

—

—

—

—

—
Consumer

545

957

(1,306
)

—

—

196

Total
$
3,651

$
957

$
(2,727
)
$
126

$
(386
)
$
1,621

At ~~September 30, 2020,~~March 31, 2021, the land development category of foreclosed assets included two properties, ~~the largest of which was~~with one located in the ~~Branson,~~Camdenton, Mo., area and ~~had a balance of $675,000, or 62.8% of~~ the ~~total category. The~~ other ~~property, which totaled 37.2% of the total category,~~in Pleasant Hill, Iowa (this was located in the Lake of the Ozarks, Mo. area. A portion of a land development property located in the Branson, Mo. area was sold during the three months ending March 31, 2020 for $315,000, which resulted in a write-down of $143,000.an FDIC-acquired asset). The subdivision construction category of foreclosed assets included one property, located in the Branson, Mo., area, and had a balance of ~~$350,000. One property in~~$169,000 after a valuation write-down during the ~~Branson, Mo. area was sold~~period. The one- to four-family residential category of foreclosed assets included three properties. Two properties were added during the three months ended March 31, ~~2020,~~2021 (both of which reduced the foreclosed assets balance by $69,000 and another property in the Branson, Mo. area was sold during the three months ended June 30, 2020, which reduced the foreclosed assets balance by $260,000. Both one- to four-family residential properties of foreclosed assets sold in 2020. One sold during the three months ended March 31, 2020 for $380,000, resulting in a gain of $70,000 and the other sold during the three months ended September 30, 2020 for $419,000, resulting in a gain of $128,000.were FDIC-acquired assets). The amount of additions and sales in the consumer category are due to the volume of repossessions of automobiles, which generally are subject to a shorter repossession process. The Company experienced increased levels of delinquencies and repossessions in indirect and used automobile loans throughout 2016 and 2017. The level of delinquencies and repossessions in indirect and used automobile loans generally decreased in 2018 through 2020.

Loans Classified “Watch”

The Company reviews the credit quality of its loan portfolio using an internal grading system that classifies loans as “Satisfactory,” “Watch,” “Special Mention,” “Substandard” and “Doubtful.” Loans classified as “Watch” are being monitored because of indications of potential weaknesses or deficiencies that may require future classification as special mention or substandard. In the ~~nine~~three months ended ~~September 30, 2020,~~March 31, 2021, loans classified as “Watch” ~~increased $27.0~~decreased $20.0 million, from ~~$37.4~~$64.8 million at December 31, ~~2019~~2020 to ~~$64.4~~$44.8 million at ~~September 30, 2020.~~March 31, 2021. This ~~increase~~decrease was primarily due to loans being upgraded out of the ~~addition of two unrelated loan relationships involving five total loans. One~~“watch” category, which primarily included one $14.3 million relationship ~~totaled $15.5 million and was~~ collateralized by a shopping center ~~project. The other~~and one $3.9 million relationship ~~totaled $10.9 million and was~~ collateralized by ~~multiple indoor recreational facilities.~~a shopping center and other real estate and business assets. See Note 6 for further discussion of the Company’s loan grading system.

Non-interest Income

For the three months ended ~~September 30, 2020,~~March 31, 2021, non-interest income increased ~~$811,000~~$2.4 million to ~~$9.5~~$9.7 million when compared to the three months ended ~~September 30, 2019,~~March 31, 2020, primarily as a result of the following items:

Net gains on loan sales: Net gains on loan sales increased ~~$1.9~~$2.1 million compared to the prior year period. The increase was due to an increase in originations of fixed-rate loans during the ~~2020~~2021 period compared to the ~~2019~~2020 period. ~~Approximately 59.0% of the one- to- four-family residential loan originations in the three months ended September 30, 2020 were refinanced loans.~~ Fixed rate single-family mortgage loans originated are generally subsequently sold in the secondary market.

~~Service charges, debit card and ATM fees~~: Service charges, debit card and ATM fees decreased $927,000 compared to the prior year period. This decrease was primarily due to a decrease in overdraft and insufficient funds fees on customer accounts. This was due to both a reduction in usage by customers and a decision near the end of the first quarter of 2020 to waive (through August 31, 2020) certain fees for customers in response to the COVID-19 pandemic. The effects of that decision were felt during the second and third quarters of 2020. In addition, the Company recorded less in debit card and ATM fees due to a reduction in debit card and ATM usage between the periods. We also saw a temporary decrease during the three months ended September 30, 2020, in our interchange income due to an adjustment by a vendor in one of their pricing models. Though a resolution was found and the income reestablished, negotiations continue to solidify longer term interchange stability.

~~Other income~~: Other income decreased $442,000 compared to the prior year period. In the 2019 period, the Company recognized approximately $510,000 in income related to origination of interest rate swaps in the Company’s back-to-back swap program with loan customers and swap counterparties.

For the nine months ended September 30, 2020, non-interest income increased $1.8 million to $25.1 million when compared to the nine months ended September 30, 2019, primarily as a result of the following items:

~~Net gains on loan sales~~: Net gains on loan sales increased $3.7 million compared to the prior year period. The increase was due to an increase in originations of fixed-rate loans during the 2020 period compared to the 2019 period. Approximately 61.2% of the one- to- four-family residentialFixed-rate mortgage loan originations increased substantially when market interest rates decreased to historically low levels in ~~the nine months ended September 30, 2020 were refinanced loans. As noted above, fixed rate single-family mortgage loans originated are generally subsequently sold in the secondary market.~~

~~Other income~~2020.: Other income increased $452,000 compared to the prior year period. In the 2020 period, the Company recognized approximately $658,000 of additional fee income related to newly-originated interest rate swaps in the Company’s back-to-back swap program with loan customers and swap counterparties when compared to the 2019 period. The Company also recognized approximately $541,000 in income related to the exit of certain tax credit partnerships during the nine months ended September 30, 2020. In the 2019 period, the Company recognized gains totaling $677,000 from the sale of, or recovery of, receivables and assets that were acquired several years prior in FDIC-assisted transactions, with no similar sales or recoveries in the current period.

~~Service charges, debit card and ATM fees~~: Service charges, debit card and ATM fees decreased $2.3 million compared to the prior year period. This decrease was primarily due to a decrease in overdraft and insufficient funds fees on customer accounts. As noted above, a decision to waive (through August 31, 2020) certain fees for customers was made in response to the COVID-19 pandemic. In addition, the Company recorded less in debit card and ATM fees due to a reduction in debit card and ATM usage between the periods. Also, during the first quarter of 2020, $200,000 in additional expenses were netted against ATM fee income due to the conversion to a new debit card processing system. We also saw a temporary decrease during the three months ended September 30, 2020, in our interchange income due to an adjustment by a vendor in one of their pricing models. Though a resolution was found and the income reestablished, negotiations continue to solidify longer term interchange stability.

Gain (loss) on derivative interest rate products: The net ~~loss~~gain on derivative interest rate products increased ~~$255,000~~$881,000 compared to the net loss in the prior year period. In the ~~2020~~2021 period, the Company recognized a ~~$424,000 decrease~~$474,000 increase in the net fair value related to interest rate swaps in the Company’s back-to-back swap program with loan customers and swap ~~counterparties compared to a $169,000 decrease in the 2019 period.~~counterparties. As market interest

rates ~~fall~~increase, this generally ~~decreases~~increases the net fair value of

these back-to-back swaps. This is a non-cash item as there was no required settlement of this amount between the Company and its swap counterparties.

Other income: Other income decreased $616,000 compared to the prior year period. In the 2020 period, the Company recognized approximately $486,000 of fee income related to newly-originated interest rate swaps in the Company’s back-to-back swap program with loan customers and swap counterparties, with no such fee income generated in the current period. In the 2020 period, the Company also recognized more income related to the exit of certain tax credit partnerships.

Non-interest Expense

For the three months ended ~~September 30, 2020,~~March 31, 2021, non-interest expense ~~increased $3.3 million~~decreased $494,000 to ~~$32.0~~$30.3 million when compared to the three months ended ~~September 30, 2019,~~March 31, 2020, primarily as a result of the following items:

Salaries and employee benefits: Salaries and employee benefits ~~increased $2.9~~decreased $1.0 million from the prior year period. The increase was partially due to annual employee compensation merit increases and increased incentives in the mortgage division, where we have added staff and variable compensation increased due to significant increases in new mortgage loan originations, much of which is sold in the secondary market as noted above. Additionally, in AugustIn March 2020, the Company ~~paid~~approved a special cash bonus to all employees totaling $1.1 million in response to the ~~ongoing impacts of~~COVID-19 pandemic. This bonus was not repeated in the ~~COVID-19 pandemic.~~

~~Net occupancy expense~~: Net occupancy expense increased $534,000 compared to the prior year period. This was primarily related to increased depreciation on new ATM/ITMs and ATM operating software upgrades implemented during the fourthfirst quarter of ~~2019. Also included in net occupancy expense for the 2020 quarter are COVID-19-related expenses for various items such as cleaning services, equipment, costs of remote work sites and other items.~~

2021.

Insurance: Insurance expense increased ~~$414,000~~$378,000 compared to the prior year period. This increase was primarily due to an increase in FDIC deposit insurance premiums. In the ~~2019 period,~~three months ended March 31, 2020, the ~~Bank~~Company had a credit with the FDIC for a portion of premiums previously paid to the deposit insurance fund. The deposit insurance fund balance was sufficient to ~~cause~~result in no premium ~~to be~~being due for the three months ended ~~September 30, 2019.~~

March 31, 2020, while the premium expense was $357,000 in the three months ended March 31, 2021.

Expense on other real estate owned and repossessions: Expense on other real estate owned and repossessions decreased ~~$404,000~~$211,000 compared to the prior year period primarily due to ~~sales~~higher valuation write-downs of ~~other assets and higher expenses related to~~ certain foreclosed assets during the ~~prior year~~2020 period. During the ~~2019~~2020 period, expenses related to certain foreclosed assets totaled approximately ~~$572,000,~~$414,000, while such expenses in the ~~2020~~2021 period totaled approximately ~~$278,000.~~

For the nine months ended September 30, 2020, non-interest expense increased $6.5 million to $92.2 million when compared to the nine months ended September 30, 2019, primarily as a result of the following items:

~~Salaries and employee benefits~~: Salaries and employee benefits increased $6.8 million in the nine months ended September 30, 2020 compared to the prior year period. The increase was partially due to annual employee compensation merit increases and increased incentives in lending, including mortgage lending activities as noted above, and operations areas. Additionally, in March 2020, the Company approved a special cash bonus to all employees totaling $1.1 million in response to the COVID-19 pandemic. In August 2020, the Company paid a second special cash bonus to all employees totaling $1.1 million in response to the pandemic.

~~Net occupancy expense~~: Net occupancy expense increased $1.2 million in the nine months ended September 30, 2020 compared to the nine months ended September 30, 2019. This was primarily related to increased depreciation on new ATM/ITMs and ATM operating software upgrades implemented during the fourth quarter of 2019. Also included in net occupancy expense for the 2020 period are COVID-19-related expenses for various items such as cleaning services, equipment, costs to set up and operate remote work sites and other items.

~~Advertising~~: Advertising expense decreased $348,000 compared to the prior year period. This decrease was primarily due to activities related to sponsorship agreements being halted as a result of the COVID-19 pandemic.

~~Expense on other real estate owned and repossessions~~: Expense on other real estate owned and repossessions decreased $696,000 compared to the prior year period primarily due to sales of other assets and higher valuation write-downs of certain foreclosed assets during the prior year period. During the 2019 period, valuation write-downs of certain foreclosed assets totaled approximately $724,000, while valuation write-downs in the 2020 period totaled approximately $481,000.

$23,000.

The Company’s efficiency ratio for the three months ended ~~September 30, 2020,~~March 31, 2021, was ~~59.64%~~56.33% compared to ~~52.63%~~58.91% for the same period in ~~2019. The~~2020. In the three months ended March 31, 2021, the improved efficiency ratio ~~for the nine months ended September 30, 2020,~~ was ~~58.45% compared to 53.94% for the same period in 2019. The higher efficiency ratio in the 2020 three and nine month periods were primarily~~ due to an

increase in non-interest ~~expense, along with~~income and a ~~small~~ decrease in ~~total revenue. Despite this increase in~~ non-interest ~~expense, the~~expense. The Company’s ratio of non-interest expense to average assets was ~~2.34%~~2.22% and ~~2.33%~~2.48% for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2021 and 2020, ~~respectively, compared to 2.34% and 2.37% for the three and nine months ended September 30, 2019,~~ respectively. The decrease in the current ~~nine month~~three-month period ratio was primarily due to an increase in average ~~assets in the 2020 period compared to the 2019 period, generally offset by the increase in non-interest expense.~~assets. Average assets for the three months ended ~~September 30, 2020,~~March 31, 2021, increased ~~$552.9~~$504.8 million, or ~~11.3%~~10.2%, from the three months ended ~~September 30, 2019,~~March 31, 2020, primarily due to increases in net loans receivable, investment securities and interest bearing cash balances at the Federal Reserve Bank. Average assets for the nine months ended September 30, 2020, increased $457.9 million, or 9.5%, from the nine months ended September 30, 2019, primarily due to increases in loans receivable, investment securities and interest bearing cash balances at the Federal Reserve Bank.

equivalents.

Provision for Income Taxes

For the three months ended ~~September 30,~~March 31, 2021 and 2020, ~~and 2019,~~ the ~~Company's~~Company’s effective tax rate was ~~21.5%~~21.0% and ~~17.5%~~15.6%, respectively. ~~For the nine months ended September 30, 2020 and 2019, the Company's effective tax rate was 18.8% and 17.6%, respectively. Except for the three months ended September 30, 2020, these~~These effective rates were ~~lower than~~at or below the statutory federal tax rate of 21%, due primarily to the utilization of certain investment tax credits and to tax-exempt investments and tax-exempt loans, which reduced the Company’s effective tax rate. The Company’s effective tax rate may fluctuate in future periods as it is impacted by the level and timing of the Company’s utilization of tax credits, ~~and~~ the level of tax-exempt investments and loans, the amount of taxable income in various state jurisdictions and the overall level of pre-tax income. The ~~Company's~~higher effective tax rate in the 2021 period was due to higher overall income, lower levels of low income housing tax credits and less tax-exempt interest income compared to prior periods. The Company’s effective income tax rate is currently generally expected to remain at or below the statutory federal tax rate due primarily to the factors noted above. In 2020, the Company’s state income tax expenses have been higher than normal in various states due to the recognition of income for tax purposes related to the gain recognized on the termination of the interest rate swap. State tax expense estimates have evolved throughout the year as taxable income and apportionment between states has been analyzed. The Company currently expects its effective tax rate (combined federal and state) to be approximately ~~18.5%~~19.5% to ~~19.5% for the full year of 2020 and 17.5% to 18.5%~~20.5% in future ~~years.~~

periods.

Average Balances, Interest Rates and Yields

The following table presents, for the periods indicated, the total dollar amount of interest income from average interest-earning assets and the resulting yields, as well as the interest expense on average interest-bearing liabilities, expressed both in dollars and rates, and the net interest margin. Average balances of loans receivable include the average balances of non-accrual loans for each period. Interest income on loans includes interest received on non-accrual loans on a cash basis. Interest income on loans includes the amortization of net loan fees which were deferred in accordance with accounting standards. Net fees included in interest income were ~~$1.7~~

$2.5 million and ~~$1.0~~$1.1 million for the three months ended ~~September 30,~~March 31, 2021 and 2020, ~~and 2019, respectively. Net fees included in interest income were $4.4 million and $3.1 million for the nine months ended September 30, 2020 and 2019,~~ respectively. Tax-exempt income was not calculated on a tax equivalent basis. The table does not reflect any effect of income taxes.


	March 31,		Three Months Ended							Three Months Ended
	2021⁽²⁾		March 31, 2021							March 31, 2020
	Yield/		Average					Yield/		Average					Yield/
	Rate		Balance			Interest		Rate		Balance			Interest		Rate

	(Dollars in Thousands)
Interest-earning assets:
Loans receivable:
One- to four-family residential	3.51	%	$	664,562		$	6,516	3.98	%	$	603,872		$	7,138	4.75	%
Other residential	4.19			999,094			10,927	4.44			826,431			10,755	5.23
Commercial real estate	4.15			1,562,689			16,584	4.30			1,489,790			18,581	5.02
Construction	4.13			604,382			6,731	4.52			709,974			9,722	5.51
Commercial business	3.74			323,429			3,887	4.87			269,160			3,192	4.77
Other loans	5.04			237,499			2,891	4.94			317,437			4,533	5.74
Industrial revenue bonds(1)	4.40			14,924			173	4.70			10,274			209	8.17

Total loans receivable	4.30			4,406,579			47,709	4.39			4,226,938			54,130	5.15

Investment securities(1)	2.63			414,696			2,817	2.75			385,003	��		3,083	3.22
Other interest-earning assets	0.25			419,426			107	0.10			90,122			261	1.16

Total interest-earning assets	3.76			5,240,701			50,633	3.92			4,702,063			57,474	4.92
Non-interest-earning assets:
Cash and cash equivalents				94,210							90,780
Other non-earning assets				133,443							170,673
Total assets			$	5,468,354						$	4,963,516

Interest-bearing liabilities:
Interest-bearing demand and savings	0.19		$	2,188,978			1,194	0.22		$	1,575,511			2,117	0.54
Time deposits	0.83			1,312,089			3,028	0.94			1,712,901			8,460	1.99
Total deposits	0.41			3,501,067			4,222	0.49			3,288,412			10,577	1.29
Short-term borrowings, repurchase agreements and other interest-bearing liabilities	0.03			146,148			9	0.03			265,054			649	0.99
Subordinated debentures issued to capital trusts	1.81			25,774			113	1.78			25,774			216	3.37
Subordinated notes	5.92			148,514			2,200	6.01			74,335			1,094	5.92

Total interest-bearing liabilities	0.62			3,821,503			6,544	0.69			3,653,575			12,536	1.38
Non-interest-bearing liabilities:
Demand deposits				983,120							675,984
Other liabilities				43,890							34,946
Total liabilities				4,848,513							4,364,505
Stockholders’ equity				619,841							599,011
Total liabilities and stockholders’ equity			$	5,468,354						$	4,963,516

Net interest income:
Interest rate spread	3.14	%				$	44,089	3.23	%				$	44,938	3.54	%
Net interest margin*								3.41	%						3.84	%
Average interest-earning assets to average interest- bearing liabilities				137.1	%						128.7	%

* Defined as the Company’s net interest income divided by total average interest-earning assets.

September 30,
2020(2)

Three Months Ended
September 30, 2020

Three Months Ended
September 30, 2019

Yield/
Rate

Average
Balance

Interest

Yield/
Rate

Average
Balance

Interest

Yield/
Rate

(Dollars in Thousands)

Interest-earning assets:

Loans receivable:

One- to four-family residential
3.72
%

$
680,452

$
7,379

4.31
%

$
542,892

$
7,153

5.23
%
Other residential
4.22

989,574

11,301

4.54

814,326

11,074

5.40

Commercial real estate
4.17

1,545,358

16,850

4.34

1,471,431

19,236

5.19

Construction
4.28

649,985

7,450

4.56

730,027

10,814

5.88

Commercial business
3.70

356,505

3,663

4.09

253,225

3,316

5.20

Other loans
5.24

270,136

3,645

5.37

369,704

5,423

5.82

Industrial revenue bonds(1)
4.45

15,345

188

4.87

14,770

210

5.64

Total loans receivable
4.28

4,507,355

50,476

4.46

4,196,375

57,226

5.41

Investment securities(1)
2.99

449,383

3,060

2.71

342,277

2,534

2.94

Other interest-earning assets
0.24

270,509

63

0.09

79,344

427

2.13

Total interest-earning assets
3.96

5,227,247

53,599

4.08

4,617,996

60,187

5.17

Non-interest-earning assets:

Cash and cash equivalents

92,244

93,293

Other non-earning assets

147,084

202,361

Total assets

$
5,466,575

$
4,913,650

Interest-bearing liabilities:

Interest-bearing demand and savings
0.29

$
1,962,023

1,650

0.33

$
1,501,697

2,030

0.54

Time deposits
1.19

1,602,981

5,444

1.35

1,728,620

9,762

2.24

Total deposits
0.67

3,565,004

7,094

0.79

3,230,317

11,792

1.45

Short-term borrowings,
repurchase agreements and
other interest-bearing
liabilities
0.02

159,373

8

0.02

289,222

1,123

1.54

Subordinated debentures
issued to capital trusts
1.85

25,774

128

1.98

25,774

253

3.90

Subordinated notes
5.85

148,113

2,201

5.91

74,119

1,095

5.86

Total interest-bearing liabilities
0.85

3,898,264

9,431

0.96

3,619,432

14,263

1.56

Non-interest-bearing liabilities:

Demand deposits

888,568

670,158

Other liabilities

45,123

37,754

Total liabilities

4,831,955

4,327,344

Stockholders’ equity

634,620

586,306

Total liabilities and stockholders’ equity

$
5,466,575

$
4,913,650

Net interest income:

Interest rate spread
3.11
%

$
44,168

3.12
%

$
45,924

3.61
%
Net interest margin*

3.36
%

3.95
%
Average interest-earning assets
to average interest- bearing
liabilities

134.1
%

127.6
%

~~Defined as the Company’s net interest income divided by total average interest-earning assets.~~

(1)

Of the total average balances of investment securities, average tax-exempt investment securities were ~~$67.8~~$45.2 million and ~~$39.6~~$32.6 million for the three months ended ~~September 30,~~March 31, 2021 and 2020, ~~and 2019,~~ respectively. In addition, average tax-exempt loans and industrial revenue bonds were ~~$19.8~~$18.7 million and ~~$20.5~~$21.0 million for the three months ended ~~September 30,~~March 31, 2021 and 2020, ~~and 2019,~~ respectively. Interest income on tax-exempt assets included in this table was ~~$570,000~~$419,000 and ~~$660,000~~$524,000 for the three months ended ~~September 30,~~March 31, 2021 and 2020, ~~and 2019,~~ respectively. Interest income net of disallowed interest expense related to tax-exempt assets was ~~$537,000~~$403,000 and ~~$601,000~~$478,000 for the three months ended ~~September 30,~~March 31, 2021 and 2020, ~~and 2019,~~ respectively.

~~(2)~~

(2)

The yield on loans at ~~September 30, 2020~~March 31, 2021 does not include the impact of the accretable yield (income) on loans acquired in the FDIC-assisted transactions. See “Net Interest Income” for a discussion of the effect on results of operations for the three months ended ~~September 30, 2020.~~

March 31, 2021.

September 30,
2020(2)

Nine Months Ended
September 30, 2020

Nine Months Ended
September 30, 2019

Yield/
Rate

Average
Balance

Interest

Yield/
Rate

Average
Balance

Interest

Yield/
Rate

(Dollars in Thousands)

Interest-earning assets:

Loans receivable:

One- to four-family residential
3.72
%

$
645,662

$
21,949

4.54
%

$
518,758

$
20,097

5.18
%
Other residential
4.22

917,778

32,997

4.80

815,008

33,334

5.47

Commercial real estate
4.17

1,522,825

52,820

4.63

1,424,595

55,235

5.18

Construction
4.28

665,567

24,785

4.97

704,074

31,573

6.00

Commercial business
3.70

318,657

10,215

4.28

259,021

10,066

5.20

Other loans
5.24

293,582

12,068

5.49

403,176

16,576

5.50

Industrial revenue bonds(1)
4.45

15,453

619

5.35

14,970

671

5.99

Total loans receivable
4.28

4,379,524

155,453

4.74

4,139,602

167,552

5.41

Investment securities(1)
2.99

422,696

9,226

2.92

310,227

7,201

3.10

Other interest-earning assets
0.24

227,506

405

0.24

87,193

1,514

2.32

Total interest-earning assets
3.96

5,029,726

165,084

4.38

4,537,022

176,267

5.19

Non-interest-earning assets:

Cash and cash equivalents

93,493

92,208

Other non-earning assets

155,233

191,296

Total assets

$
5,278,452

$
4,820,526

Interest-bearing liabilities:

Interest-bearing demand and
savings
0.29

$
1,792,492

5,629

0.42

$
1,491,255

5,723

0.51

Time deposits
1.19

1,701,383

21,083

1.66

1,711,692

28,121

2.20

Total deposits
0.67

3,493,875

26,712

1.02

3,202,947

33,844

1.41

Short-term borrowings, repurchase
agreements and other interest-
bearing liabilities
0.02

195,459

667

0.46

264,111

2,904

1.47

Subordinated debentures
issued to capital trusts
1.85

25,774

511

2.65

25,774

787

4.08

Subordinated notes
5.85

104,256

4,633

5.94

74,012

3,283

5.93

Total interest-bearing liabilities
0.85

3,819,364

32,523

1.14

3,566,844

40,818

1.53

Non-interest-bearing liabilities:

Demand deposits

799,594

661,446

Other liabilities

39,983

32,620

Total liabilities

4,658,941

4,260,910

Stockholders’ equity

619,511

559,616

Total liabilities and stockholders’
equity

$
5,278,452

$
4,820,526

Net interest income:

Interest rate spread
3.11
%

$
132,561

3.24
%

$
135,449

3.66
%
Net interest margin*

3.52
%

3.99
%
Average interest-earning assets
to average interest-bearing
liabilities

131.7
%

127.2
%

*	~~Defined as the Company’s net interest income divided by total average interest-earning assets.~~
~~(1)~~	Of the total average balances of investment securities, average tax-exempt investment securities were $54.8 million and $43.6 million for the nine months ended September 30, 2020 and 2019, respectively. In addition, average tax-exempt loans and industrial revenue bonds were $20.4 million and $21.1 million for the nine months ended September, 2020 and 2019, respectively. Interest income on tax-exempt assets included in this table was $1.6 million and $1.9 million for the nine months ended September 30, 2020 and 2019, respectively. Interest income net of disallowed interest expense related to tax-exempt assets was $1.5 million and $1.7 million for the nine months ended September 30, 2020 and 2019, respectively.
~~(2)~~	The yield on loans at September 30, 2020 does not include the impact of the accretable yield (income) on loans acquired in the FDIC-assisted transactions. See “Net Interest Income” for a discussion of the effect on results of operations for the nine months ended September 30, 2020.

Rate/Volume Analysis

The following tables present the dollar amounts of changes in interest income and interest expense for major components of interest-earning assets and interest-bearing liabilities for the periods shown. For each category of interest-earning assets and interest-bearing liabilities, information is provided on changes attributable to (i) changes in rate (i.e., changes in rate multiplied by old volume) and (ii) changes in volume (i.e., changes in volume multiplied by old rate). For purposes of this table, changes attributable to both rate and volume, which cannot be segregated, have been allocated proportionately to volume and rate. Tax-exempt income was not calculated on a tax equivalent basis.

Three Months Ended September 30,

2020 vs. 2019

Increase (Decrease)

Total

Due to

Increase

Rate

Volume

(Decrease)

(Dollars in Thousands)

Interest-earning assets:

Loans receivable
$
(10,712
)
$
3,962

$
(6,750
)
Investment securities

(210
)

736

526

Other interest-earning assets

(685
)

321

(364
)
Total interest-earning assets

(11,607
)

5,019

(6,588
)
Interest-bearing liabilities:

Demand deposits

(893
)

513

(380
)
Time deposits

(3,650
)

(668
)

(4,318
)
Total deposits

(4,543
)

(155
)

(4,698
)
Short-term borrowings

(766
)

(349
)

(1,115
)
Subordinated debentures issued to capital trust

(125
)

—

(125
)
Subordinated notes

9

1,097

1,106

Total interest-bearing liabilities

(5,425
)

593

(4,832
)
Net interest income
$
(6,182
)
$
4,426

$
(1,756
)

Nine Months Ended September 30,

2020 vs. 2019

Increase (Decrease)

Total

Due to

Increase

Rate

Volume

(Decrease)

(Dollars in Thousands)

Interest-earning assets:

Loans receivable
$
(21,484
)
$
9,385

$
(12,099
)
Investment securities

(459
)

2,484

2,025

Other interest-earning assets

(2,143
)

1,034

(1,109
)
Total interest-earning assets

(24,086
)

12,903

(11,183
)
Interest-bearing liabilities:

Demand deposits

(1,143
)

1,049

(94
)
Time deposits

(6,870
)

(168
)

(7,038
)
Total deposits

(8,013
)

881

(7,132
)
Short-term borrowings

(1,625
)

(612
)

(2,237
)
Subordinated debentures issued to capital trust

(276
)

—

(276
)
Subordinated notes

3

1,347

1,350

Total interest-bearing liabilities

(9,911
)

1,616

(8,295
)
Net interest income
$
(14,175
)
$
11,287

$
(2,888
)


	Three Months Ended March 31,
	2021 vs. 2020
	Increase (Decrease)				Total
	Due to				Increase
	Rate		Volume		(Decrease)

	(Dollars in Thousands)
Interest-earning assets:
Loans receivable	$	(8,576)	$	2,155	$	(6,421)
Investment securities		(485)		219		(266)
Other interest-earning assets		(414)		260		(154)
Total interest-earning assets		(9,475)		2,634		(6,841)
Interest-bearing liabilities:
Demand deposits		(1,555)		632		(923)
Time deposits		(3,766)		(1,666)		(5,432)
Total deposits		(5,321)		(1,034)		(6,355)
Short-term borrowings		(438)		(202)		(640)
Subordinated debentures issued to capital trust		(103)		—		(103)
Subordinated notes		16		1,090		1,106
Total interest-bearing liabilities		(5,846)		(146)		(5,992)
Net interest income	$	(3,629)	$	2,780	$	(849)

Liquidity

Liquidity is a measure of the ~~Company's~~Company’s ability to generate sufficient cash to meet present and future financial obligations in a timely manner through either the sale or maturity of existing assets or the acquisition of additional funds through liability management. These obligations include the credit needs of customers, funding deposit withdrawals, and the day-to-day operations of the Company. Liquid assets include cash, interest-bearing deposits with financial institutions and certain investment securities and loans. As a result of the Company’s management of the ability to generate liquidity primarily through liability funding, management believes that the Company maintains overall liquidity sufficient to satisfy its ~~depositors'~~depositors’ requirements and meet its borrowers’ credit needs. At ~~September 30, 2020,~~

March 31, 2021, the Company had commitments of approximately ~~$145.3~~$147.2 million to fund loan originations, ~~$1.09~~$1.18 billion of unused lines of credit and unadvanced loans, and ~~$17.9~~$16.0 million of outstanding letters of credit.

Loan commitments and the unfunded portion of loans at the dates indicated were as follows (in thousands):


	March 31,		December 31,		December 31,		December 31,		December 31,
	2021		2020		2019		2018		2017
Closed non-construction loans with unused available lines
Secured by real estate (one- to four-family)	$	170,353	$	164,480	$	155,831	$	150,948	$	133,587
Secured by real estate (not one- to four-family)		25,754		22,273		19,512		11,063		10,836
Not secured by real estate - commercial business		71,132		77,411		83,782		87,480		113,317

Closed construction loans with unused available lines
Secured by real estate (one-to four-family)		52,653		42,162		48,213		37,162		20,919
Secured by real estate (not one-to four-family)		812,111		823,106		798,810		906,006		718,277

Loan Commitments not closed
Secured by real estate (one-to four-family)		93,229		85,917		69,295		24,253		23,340
Secured by real estate (not one-to four-family)		50,883		45,860		92,434		104,871		156,658
Not secured by real estate - commercial business		3,119		699		—		405		4,870

	$	1,279,234	$	1,261,908	$	1,267,877	$	1,322,188	$	1,181,804

September 30,
2020

June 30,
2020

March 31,
2020

December 31,
2019

December 31,
2018

December 31,
2017
Closed non-construction loans with unused
      available lines

  Secured by real estate (one- to four-family)
$
160,409

$
158,687

$
156,381

$
155,831

$
150,948

$
133,587
  Secured by real estate (not one- to four-family)

19,295

16,124

16,832

19,512

11,063

10,836
  Not secured by real estate - commercial business

114,519

105,071

79,117

83,782

87,480

113,317

Closed construction loans with unused
       available lines

  Secured by real estate (one-to four-family)

33,359

37,789

50,101

48,213

37,162

20,919
  Secured by real estate (not one-to four-family)

714,566

753,589

809,436

798,810

906,006

718,277

Loan Commitments not closed

  Secured by real estate (one-to four-family)

94,203

112,769

141,432

69,295

24,253

23,340
  Secured by real estate (not one-to four-family)

50,264

73,103

95,652

92,434

104,871

156,658
  Not secured by real estate - commercial business

800

800

—

—

405

4,870

$
1,187,415

$
1,257,932

$
1,348,951

$
1,267,877

$
1,322,188

$
1,181,804

The ~~Company's~~Company’s primary sources of funds are customer deposits, FHLBank advances, other borrowings, loan repayments, unpledged securities, proceeds from sales of loans and available-for-sale securities and funds provided from operations. The Company utilizes particular sources of funds based on the comparative costs and availability at the time. The Company has from time to time chosen not to pay rates on deposits as high as the rates paid by certain of its competitors and, when believed to be appropriate, supplements deposits with less expensive alternative sources of funds.

At ~~September 30, 2020,~~March 31, 2021, the Company had these available secured lines and on-balance sheet liquidity:

Federal Home Loan Bank line
$ ~~1,133.7~~
1,002.0 million
Federal Reserve Bank line

$     ~~431.5~~
444.8 million
Cash and cash equivalents

$     ~~338.3~~
612.5 million
Unpledged securities

$     ~~223.1~~
270.7 million

Statements of Cash Flows. During both the ~~nine~~three months ended ~~September 30,~~March 31, 2020 and 2019, the Company had positive cash flows from operating activities, negative cash flows from investing activities and positive cash flows from financing activities.
Cash flows from operating activities for the periods covered by the Statements of Cash Flows have been primarily related to changes in accrued and deferred assets, credits and other liabilities, the provision for ~~loan~~credit losses, depreciation and amortization, realized gains on sales of loans and the amortization of deferred loan origination fees and discounts (premiums) on loans and investments, all of which are non-cash or non-operating adjustments to operating cash flows. Net income adjusted for non-cash and non-operating items and the origination and sale of

loans held for sale were the primary source of cash flows from operating activities. Operating activities provided cash flows of ~~$35.8~~$24.5 million and ~~$64.2~~$17.7 million during the ~~nine~~three months ended ~~September 30,~~March 31, 2021 and 2020, ~~and 2019,~~ respectively.
During the ~~nine~~three months ended ~~September 30, 2020,~~March 31, 2021, investing activities used cash of ~~$278.9~~$55.9 million, primarily due to the purchase of investment securities and the purchase of loans, partially offset by the net repayment of loans and payments received on investment securities. Investing activities in the 2020 period used cash of $4.3 million, primarily due to the net origination of loans, the purchase of investment securities and the purchase of equipment, partially offset by the cash proceeds from the termination of interest rate derivatives and the ~~sale of other real estate owned and~~ payments received on investment securities. Investing activities in the 2019 period used cash of $264.5 million, primarily due to the purchase of loans and the net origination of loans, the purchase of investment securities and the purchase of equipment, partially offset by the sale of other real estate owned, the sale of investment securities and payments received on investment securities.
Changes in cash flows from financing activities during the periods covered by the Statements of Cash Flows are due to changes in deposits after interest credited ~~changes in FHLBank advances~~ and changes in short-term borrowings, as well as advances from borrowers for taxes and insurance,
59

dividend payments to stockholders, purchases of the Company’s common stock and the exercise of common stock options. Financing activities provided cash of ~~$361.2~~$80.2 million and ~~$188.5~~$7.0 million during the ~~nine~~three months ended ~~September 30,~~March 31, 2021 and 2020, ~~and 2019,~~ respectively. In the ~~2020 nine-month~~2021 three-month period, financing activities provided cash primarily as a result of net increases in checking account balances, partially offset by decreases in ~~short-term borrowings,~~time deposits, decreases in ~~time deposits,~~short-term borrowings, dividends paid to stockholders and the purchase of the Company’s common stock. ~~Also in~~In the 2020 ~~period, cash was provided by the issuance of subordinated notes. In the 2019 nine-month~~three-month period, financing activities provided cash primarily as a result of net increases in checking account balances and certificates of deposit, partially offset by decreases in short-term borrowings, ~~and~~ dividends paid to ~~stockholders.~~
stockholders and the purchase of the Company’s common stock.
Capital Resources
Management continuously reviews the capital position of the Company and the Bank to ensure compliance with minimum regulatory requirements, as well as to explore ways to increase capital either by retained earnings or other means.
At ~~September 30, 2020,~~March 31, 2021, the ~~Company's~~Company’s total ~~stockholders'~~stockholders’ equity and common stockholders’ equity were each ~~$624.6~~$611.5 million, or ~~11.5%~~10.9% of total assets, equivalent to a book value of ~~$45.00~~$44.65 per common share. As of December 31, ~~2019,~~2020, total stockholders’ equity and common stockholders’ equity were each ~~$603.1~~$629.7 million, or ~~12.0%~~11.4% of total assets, equivalent to a book value of ~~$42.29~~$45.79 per common share. At ~~September 30, 2020,~~March 31, 2021, the Company’s tangible common equity to tangible assets ratio was ~~11.4%~~10.8%, compared to ~~11.9%~~11.3% at December 31, ~~2019~~2020 (See Non-GAAP Financial Measures below).
Included in stockholders’ equity at ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019,~~2020, were unrealized gains (net of taxes) on the Company’s available-for-sale investment securities totaling ~~$24.1~~$9.3 million and ~~$9.0~~$23.3 million, respectively. This ~~increase~~decrease in unrealized gains primarily resulted from ~~lower~~rising market interest rates, which ~~increased~~decreased the fair value of the investment securities.
Also included in stockholders’ equity at ~~September 30, 2020,~~March 31, 2021, were realized gains (net of taxes) on the Company’s cash flow hedge (interest rate swap), which was terminated in March 2020, totaling ~~$31.5~~$28.3 million. This amount, plus associated deferred taxes, is expected to be accreted to interest income over the remaining term of the original interest rate swap contract, which was to end in October 2025. At ~~September 30, 2020,~~March 31, 2021, the remaining pre-tax amount to be recorded in interest income was ~~$40.8~~$36.7 million. The net effect on total stockholders’ equity over time will be no impact as the reduction of this realized gain will be offset by an increase in retained earnings (as the interest income flows through pre-tax income).
Banks are required to maintain minimum risk-based capital ratios. These ratios compare capital, as defined by the risk-based regulations, to assets adjusted for their relative risk as defined by the regulations. Under current guidelines banks must have a minimum common equity Tier 1 capital ratio of 4.50%, a minimum Tier 1 risk-based capital ratio of 6.00%, a minimum total risk-based capital ratio of 8.00%, and a minimum Tier 1 leverage ratio of 4.00%. To be considered ~~"well~~“well capitalized,"” banks must have a minimum common equity Tier 1 capital ratio of

6.50%, a minimum Tier 1 risk-based capital ratio of 8.00%, a minimum total risk-based capital ratio of 10.00%, and a minimum Tier 1 leverage ratio of 5.00%. On ~~September 30, 2020,~~March 31, 2021, the ~~Bank's~~Bank’s common equity Tier 1 capital ratio was ~~13.3%~~14.1%, its Tier 1 capital ratio was ~~13.3%~~14.1%, its total capital ratio was ~~14.4%~~15.4% and its Tier 1 leverage ratio was ~~11.5%~~11.8%. As a result, as of ~~September 30, 2020,~~March 31, 2021, the Bank was well capitalized, with capital ratios in excess of those required to qualify as such. On December 31, ~~2019,~~2020, the ~~Bank's~~Bank’s common equity Tier 1 capital ratio was ~~13.1%~~13.7%, its Tier 1 capital ratio was ~~13.1%~~13.7%, its total capital ratio was ~~14.0%~~14.9% and its Tier 1 leverage ratio was ~~12.3%~~11.8%. As a result, as of December 31, ~~2019,~~2020, the Bank was well capitalized, with capital ratios in excess of those required to qualify as such.
The FRB has established capital regulations for bank holding companies that generally parallel the capital regulations for banks. On ~~September 30, 2020,~~March 31, 2021, the ~~Company's~~Company’s common equity Tier 1 capital ratio was ~~11.9%~~12.7%, its Tier 1 capital ratio was ~~12.4%~~13.2%, its total capital ratio was ~~16.7%~~17.8% and its Tier 1 leverage ratio was ~~10.7%~~11.0%. To be considered well capitalized, a bank holding company must have a Tier 1 risk-based capital ratio of at least 6.00% and a total risk-based capital ratio of at least 10.00%. As of ~~September 30, 2020,~~March 31, 2021, the Company was considered well capitalized, with capital ratios in excess of those required to qualify as such. On December 31, ~~2019,~~2020, the ~~Company's~~Company’s common equity Tier 1 capital ratio was ~~12.0%~~12.2%, its Tier 1 capital ratio was ~~12.5%~~12.7%, its total capital ratio was ~~15.0%~~17.2% and its Tier 1 leverage ratio was ~~11.8%~~10.9%. As of December 31, ~~2019,~~2020, the Company was considered well capitalized, with capital ratios in excess of those required to qualify as such.
In June 2020, the Company further enhanced its regulatory capital position with the issuance of $75.0 million of 5.50% fixed-to-floating rate subordinated notes due June 15, 2030, which count as Tier 2 Capital in the calculation of the Total Capital Ratio. The notes will accrue interest at the fixed rate of 5.50% to but excluding June 15, 2025. From and including June 15, 2025 to but excluding the maturity date of June 15, 2030, if not redeemed by the Company, the notes will accrue interest at a floating rate.
In addition to the minimum common equity Tier 1 capital ratio, Tier 1 risk-based capital ratio and total risk-based capital ratio, the Company and the Bank have to maintain a capital conservation buffer consisting of additional common equity Tier 1 capital greater than 2.5% of risk-weighted assets above the required minimum levels in order to avoid limitations on paying dividends, repurchasing shares, and paying discretionary bonuses. At March 31, 2021, the Company and the Bank both had additional common equity Tier 1 capital in excess of the buffer amount.
60

For additional information, see “Item 1. Business--Government Supervision and Regulation-Capital” in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2019.~~
2020.
Dividends. During the three months ended September 30, 2020, the Company declared a common stock cash dividend of $0.34 per share, or 35% of net income per diluted common share for that three month period, and paid a common stock cash dividend of $0.34 per share (which was declared in June 2020). During the three months ended September 30, 2019,March 31, 2021, the Company declared a common stock cash dividend of $0.34 per share, or 25% of net income per diluted common share for that three month period, and paid a common stock cash dividend of ~~$0.32~~$0.34 per share (which was declared in ~~June 2019)~~December 2020). During the ~~nine~~three months ended ~~September 30,~~March 31, 2020, the Company declared common stock cash dividends of ~~$2.02~~$1.34 per share, or ~~69%~~129% of net income per diluted common share for that ~~nine~~three month period, and paid common stock cash dividends of ~~$2.02~~$1.34 per share ($0.34 of which was declared in December 2019). The ~~total~~ dividends declared and paid during the ~~nine~~three months ended ~~September 30,~~March 31, 2020 ~~consisted of regular cash dividends of $1.02 per share and~~included a special cash dividend of $1.00 per ~~share. During~~share in addition to the nine months ended September 30, 2019, the Company declared common stock cash dividends of $1.73 per share, or 44% of net income per diluted common share for that nine month period, and paid common stock cash dividends of $1.71 per share. The total dividends declared during the nine months ended September 30, 2019, consisted of regular ~~cash dividends of $0.98 per share and a special~~ cash dividend of ~~$0.75~~$0.34 per share. The Board of Directors meets regularly to consider the level and the timing of dividend payments. The $0.34 per share dividend declared but unpaid as of ~~September 30, 2020,~~March 31, 2021, was paid to stockholders ~~on October 13, 2020.~~
in April 2021.
Common Stock Repurchases and Issuances. The Company has been in various buy-back programs since May 1990. During the three months ended ~~September 30, 2020,~~March 31, 2021, the Company issued ~~2,550~~15,904 shares of stock at an average price of ~~$26.53~~$39.09 per share to cover stock option exercises and repurchased ~~206,400~~74,865 shares of its common stock at an average price of ~~$37.39~~$50.50 per share. During the three months ended ~~September 30, 2019,~~March 31, 2020, the Company issued ~~12,438~~6,475 shares of stock at an average price of ~~$34.28 per share to cover stock option exercises and did not repurchase any~~

~~shares of its common stock. During the nine months ended September 30, 2020, the Company issued 9,625 shares of stock at an average price of $33.76~~$37.58 per share to cover stock option exercises and repurchased ~~390,107~~183,707 shares of its common stock at an average price of ~~$40.67~~$44.36 per share. During the nine months ended September 30, 2019, the Company issued 78,896 shares of stock at an average price of $29.89 per share to cover stock option exercises and repurchased 16,040 shares of its common stock at an average price of $52.93 per share.
On April 18, 2018, the Company's Board of Directors authorized management to repurchase up to 500,000 shares of the Company's outstanding common stock, under a program of open market purchases or privately negotiated transactions. The program does not have an expiration date. Management has historically utilized stock buy-back programs from time to time as long as management believed that repurchasing the stock would contribute to the overall growth of shareholder value. The number of shares of stock that will be repurchased at any particular time and the prices that will be paid are subject to many factors, several of which are outside of the control of the Company. The primary factors, however, are the number of shares available in the market from sellers at any given time, the price of the stock within the market as determined by the market and the projected impact on the Company’s earnings per share and capital. ~~As of September 30, 2020, there were 76,311 shares still available to be repurchased under the program.~~
On October 21, 2020, the Company’s Board of Directors authorized management to repurchase up to one million additional shares of the Company’s common stock under a program of open market purchases or privately negotiated transactions. The authorization of this program became effective in November 2020 and does not have an expiration ~~date, and will take effect after the Company completes the repurchase of the shares remaining under the 2018 stock repurchase program.~~
date.
Non-GAAP Financial Measures
This document contains certain financial information determined by methods other than in accordance with accounting principles generally accepted in the United States (“GAAP”)~~, consisting~~. These non-GAAP financial measures include the ratio of ~~the~~ tangible common equity to tangible ~~assets ratio.~~
assets.
In calculating the ratio of tangible common equity to tangible assets, we subtract period-end intangible assets from common equity and from total assets. Management believes that the presentation of this measure excluding the impact of intangible assets provides useful supplemental information that is helpful in understanding our financial condition and results of operations, as it provides a method to assess management’s success in utilizing our tangible capital as well as our capital strength. Management also believes that providing a measure that excludes balances of intangible assets, which are subjective components of valuation, facilitates the comparison of our performance with the performance of our peers. In addition, management believes that this is a standard financial measure used in the banking industry to evaluate performance.
~~This~~These non-GAAP financial ~~measure is~~measures are supplemental and isare not a substitute for any analysis based on GAAP financial measures. Because not all companies use the same calculation of non-GAAP measures, this presentation may not be comparable to similarly titled measures as calculated by other companies.

61

Non-GAAP Reconciliation: Ratio of Tangible Common Equity to Tangible Assets


March 31,

December 31,


2021

2020

(Dollars in Thousands)

Common equity at period end

$
611,457

$
629,741

Less: Intangible assets at period end

6,655

6,944

Tangible common equity at period end (a)

$
604,802

$
622,797

Total assets at period end

$
5,603,770

$
5,526,420

Less: Intangible assets at period end

6,655

6,944

Tangible assets at period end (b)

$
5,597,115

$
5,519,476

Tangible common equity to tangible assets (a) / (b)

10.81
%

11.28
%

September 30,

December 31,

2020

2019

(Dollars in Thousands)

Common equity at period end
$
624,643

$
603,066

Less: Intangible assets at period end

7,232

8,098

Tangible common equity at period end (a)
$
617,411

$
594,968

Total assets at period end
$
5,443,010

$
5,015,072

Less: Intangible assets at period end

7,232

8,098

Tangible assets at period end (b)
$
5,435,778

$
5,006,974

Tangible common equity to tangible assets (a) / (b)

11.36
%

11.88
%

62

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Asset and Liability Management and Market Risk
A principal operating objective of the Company is to produce a stable ~~component of~~ earnings by achieving a favorable interest rate spread that can be sustained during fluctuations in prevailing interest rates. The Company has sought to reduce its exposure to adverse changes in interest rates by attempting to achieve a closer match between the periods in which its interest-bearing liabilities and interest-earning assets can be expected to reprice through the origination of adjustable-rate mortgages and loans with shorter terms to maturity and the purchase of other shorter term interest-earning assets.
Our Risk When Interest Rates Change
The rates of interest we earn on assets and pay on liabilities generally are established contractually for a period of time. Market interest rates change over time. Accordingly, our results of operations, like those of other financial institutions, are impacted by changes in interest rates and the interest rate sensitivity of our assets and liabilities. The risk associated with changes in interest rates and our ability to adapt to these changes is known as interest rate risk and is our most significant market risk.
How We Measure the Risk to Us Associated with Interest Rate Changes
In an attempt to manage our exposure to changes in interest rates and comply with applicable regulations, we monitor Great ~~Southern's~~Southern’s interest rate risk. In monitoring interest rate risk, we regularly analyze and manage assets and liabilities based on their payment streams and interest rates, the timing of their maturities and their sensitivity to actual or potential changes in market interest rates.
The ability to maximize net interest income is largely dependent upon the achievement of a positive interest rate spread that can be sustained despite fluctuations in prevailing interest rates. Interest rate sensitivity is a measure of the difference between amounts of interest-earning assets and interest-bearing liabilities which either reprice or mature within a given period of time. The difference, or the interest rate repricing ~~"gap,"~~“gap,” provides an indication of the extent to which an ~~institution's~~institution’s interest rate spread will be affected by changes in interest rates. A gap is considered positive when the amount of interest-rate sensitive assets exceeds the amount of interest-rate sensitive liabilities repricing during the same period, and is considered negative when the amount of interest-rate sensitive liabilities exceeds the amount of interest-rate sensitive assets during the same period. Generally, during a period of rising interest rates, a negative gap within shorter repricing periods would adversely affect net interest income, while a positive gap within shorter repricing periods would result in an increase in net interest income. During a period of falling interest rates, the opposite would be true. As of ~~September 30, 2020,~~March 31, 2021, Great ~~Southern's~~Southern’s interest rate risk models indicate that, generally, rising interest rates are expected to have a positive impact on the ~~Company's~~Company’s net interest income, while declining interest rates are expected to have a negative impact on net interest income. We model various interest rate scenarios for rising and falling rates, including both parallel and non-parallel shifts in rates. The results of our modeling indicate that net interest income is not likely to be significantly affected either positively or negatively in the first twelve months following a rate change, regardless of any changes in interest rates, because our portfolios are relatively well matched in a twelve-month horizon. In a situation where market interest rates decrease significantly in a short period of time, as they did in March 2020, our net interest margin decrease may be more pronounced in the very near term (first one to three months), due to fairly rapid decreases in LIBOR interest rates. In the subsequent months we expect that the net interest margin would stabilize and begin to improve, as renewal interest rates on maturing time deposits are expected to decrease compared to the current rates paid on those products. Subsequent to ~~September 30, 2020,~~March 31, 2021, cumulative time deposit maturities are as follows: within three months --$~~384~~339 million; within six months -- ~~$712~~$619 million; and within twelve months -- ~~$1.2 billion.~~$941 million. At ~~September 30, 2020,~~March 31, 2021, the weighted average interest rates on these various cumulative maturities were ~~1.22%~~0.78%, ~~1.24%~~0.79% and ~~1.14%~~0.78%, respectively.

The current level and shape of the interest rate yield curve poses challenges for interest rate risk management. Prior to its increase of 0.25% on December 16, 2015, the FRB had last changed interest rates on December 16, 2008. This was the first rate increase since September 29, 2006. The FRB also implemented rate change increases of 0.25% on eight additional occasions beginning December 14, 2016 and through December 31, 2018, with the Federal Funds rate reaching as high as 2.50%. After December 2018, the FRB paused its rate increases and, in July, September and
October 2019, implemented rate decreases of 0.25% on each of those occasions. At December 31, 2019, the Federal Funds rate stood at 1.75%. In response to the COVID-19 pandemic, ~~in the first quarter of 2020,~~ the FRB decreased interest rates on two occasions in March 2020, a 0.50% decrease on March 3rd and a 1.00% decrease on March 16th. At ~~September 30, 2020,~~March 31, 2021, the Federal Funds rate stood at 0.25%. A substantial portion of Great Southern’s loan portfolio ($~~2.10~~2.00 billion at ~~September 30, 2020~~)March 31, 2021) is tied to the one-month or three-month LIBOR index and will be subject to adjustment at least once within 90 days after ~~September 30, 2020~~.March 31, 2021. Of these loans, ~~$2.08~~$1.97 billion had interest rate floors. Great Southern also has a portfolio of loans ($~~256~~246 million at ~~September 30~~March 31,
63
~~, 2020~~)
2021) tied to a ~~"prime rate"~~“prime rate” of interest and will adjust immediately with changes to the “prime rate” of interest. During ~~the latter half of 2019 and the nine months ended September 30,~~ 2020, we experienced some compression of our net interest margin ~~percentage~~ due to 2.25% of Federal Fund rate ~~cuts over that time period.~~cuts. Margin compression primarily resulted from generally slower changing average interest rates on deposits and borrowings and lower yields on loans and other interest-earning assets. LIBOR interest rates decreased further in April and May of 2020, putting pressure on loan yields during ~~the three months ended June 30,~~most of 2020 and ~~September 30, 2020,~~into 2021, and strong pricing competition for loans and deposits remains in most of our markets.
Interest rate risk exposure estimates (the sensitivity gap) are not exact measures of an ~~institution's~~institution’s actual interest rate risk. They are only indicators of interest rate risk exposure produced in a simplified modeling environment designed to allow management to gauge the ~~Bank's~~Bank’s sensitivity to changes in interest rates. They do not necessarily indicate the impact of general interest rate movements on the ~~Bank's~~Bank’s net interest income because the repricing of certain categories of assets and liabilities is subject to competitive and other factors beyond the ~~Bank's~~Bank’s control. As a result, certain assets and liabilities indicated as maturing or otherwise repricing within a stated period may in fact mature or reprice at different times and in different amounts and cause a change, which potentially could be material, in the ~~Bank's~~Bank’s interest rate risk.
In order to minimize the potential for adverse effects of material and prolonged increases and decreases in interest rates on Great ~~Southern's~~Southern’s results of operations, Great Southern has adopted asset and liability management policies to better match the maturities and repricing terms of Great ~~Southern's~~Southern’s interest-earning assets and interest-bearing liabilities. Management recommends and the Board of Directors sets the asset and liability policies of Great Southern which are implemented by the Asset and Liability Committee. The Asset and Liability Committee is chaired by the Chief Financial Officer and is comprised of members of Great ~~Southern's~~Southern’s senior management. The purpose of the Asset and Liability Committee is to communicate, coordinate and control asset/liability management consistent with Great ~~Southern's~~Southern’s business plan and board-approved policies. The Asset and Liability Committee establishes and monitors the volume and mix of assets and funding sources taking into account relative costs and spreads, interest rate sensitivity and liquidity needs. The objectives are to manage assets and funding sources to produce results that are consistent with liquidity, capital adequacy, growth, risk, and profitability goals. The Asset and Liability Committee meets on a monthly basis to review, among other things, economic conditions and interest rate outlook, current and projected liquidity needs and capital positions and anticipated changes in the volume and mix of assets and liabilities. At each meeting, the Asset and Liability Committee recommends appropriate strategy changes based on this review. The Chief Financial Officer or his designee is responsible for reviewing and reporting on the effects of the policy implementations and strategies to the Board of Directors at their monthly meetings.
In order to manage its assets and liabilities and achieve the desired liquidity, credit quality, interest rate risk, profitability and capital targets, Great Southern has focused its strategies on originating adjustable rate loans or loans with fixed rates that mature in less than five years, and managing its deposits and borrowings to establish stable relationships with both retail customers and wholesale funding sources.
At times, depending on the level of general interest rates, the relationship between long- and short-term interest rates, market conditions and competitive factors, we may determine to increase our interest rate risk position somewhat in order to maintain or increase our net interest margin.

The Asset and Liability Committee regularly reviews interest rate risk by forecasting the impact of alternative interest rate environments on net interest income and market value of portfolio equity, which is defined as the net present value of an ~~institution's~~institution’s existing assets, liabilities and off-balance sheet instruments, and evaluating such impacts against the maximum potential changes in net interest income and market value of portfolio equity that are authorized by the Board of Directors of Great Southern.
In the normal course of business, the Company may use derivative financial instruments (primarily interest rate swaps) from time to time to assist in its interest rate risk management. In 2011, the Company began executing interest rate swaps with commercial banking customers to facilitate their respective risk management strategies. Those interest rate swaps are simultaneously hedged by offsetting interest rate swaps that the Company executes with a third party, such that the Company minimizes its net risk exposure resulting from such transactions. Because the interest rate swaps associated with this program do not meet the strict hedge accounting requirements, changes in the fair value of both the customer swaps and the offsetting swaps are recognized directly in earnings. These interest rate derivatives result from a service provided to certain qualifying customers and, therefore, are not used to manage interest rate risk in the Company’s assets or liabilities. The Company manages a matched book with respect to its derivative instruments in order to minimize its net risk exposure resulting from such transactions.
In October 2018, the Company entered into an interest rate swap transaction as part of its ongoing interest rate management strategies to hedge the risk of its floating rate loans. The notional amount of the swap was $400 million with a contractual termination date of October 6, 2025. Under the terms of the swap, the Company received a fixed rate of interest of 3.018% and paid a floating rate of
64

interest equal to one-month USD-LIBOR. The floating rate reset monthly and net settlements of interest due to/from the counterparty also occurred monthly. Due to lower market interest rates, the Company received net interest settlements which were recorded as loan interest income. If USD-LIBOR exceeded the fixed rate of interest, the Company was required to pay net settlements to the counterparty and record those net payments as a reduction of interest income on loans. The effective portion of the gain or loss on the derivative was reported as a component of other comprehensive income and reclassified into earnings in the same period or periods during which the hedged transaction affected earnings. Gains and losses on the derivative representing either hedge ineffectiveness or hedge components excluded from the assessment of effectiveness are recognized in current earnings.
In March 2020, the Company and its swap counterparty mutually agreed to terminate the $400 million interest rate swap prior to its contractual maturity. The Company received a payment of $45.9 million from its swap counterparty as a result of this termination.
The Company’s interest rate derivatives and hedging activities are discussed further in Note 16 of the Notes to Consolidated Financial Statements contained in this report.
ITEM 4. CONTROLS AND PROCEDURES
We maintain a system of disclosure controls and procedures (as defined in Rule 13(a)-15(e) under the Securities Exchange Act of 1934 (the ~~"Exchange Act"~~“Exchange Act”)) that is designed to provide reasonable assurance that information required to be disclosed by us in the reports that we file under the Exchange Act is recorded, processed, summarized and reported accurately and within the time periods specified in the ~~SEC's~~SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate. An evaluation of our disclosure controls and procedures was carried out as of ~~September 30, 2020,~~March 31, 2021, under the supervision and with the participation of our principal executive officer, principal financial officer and several other members of our senior management. Our principal executive officer and principal financial officer concluded that, as of ~~September 30, 2020,~~March 31, 2021, our disclosure controls and procedures were effective in ensuring that the information we are required to disclose in the reports we file or submit under the ~~Exchange~~ Act is (i) accumulated and communicated to our management (including the principal executive officer and principal financial officer) to allow timely decisions regarding required disclosure, and (ii) recorded, processed, summarized and reported within the time periods specified in the ~~SEC's~~SEC’s rules and forms.

There were no changes in our internal control over financial reporting (as defined in Rule ~~13(a)-15(f)~~13a-15(f) under the Act) that occurred during the quarter ended ~~September 30, 2020,~~March 31, 2021, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
We do not expect that our internal control over financial reporting will prevent all errors and all fraud. A control procedure, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control procedure are met. Because of the inherent limitations in all control procedures, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns in controls or procedures can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the control. The design of any control procedure also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control procedure, misstatements due to error or fraud may occur and not be detected.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
In the normal course of business, the Company and its subsidiaries are subject to pending and threatened legal actions, some of which seek substantial relief or damages. While the ultimate outcome of such legal proceedings cannot be predicted with certainty, after reviewing pending and threatened litigation with counsel, management believes at this time that the outcome of such litigation will not have a material adverse effect on the Company’s business, financial condition or results of operations.
65

Item 1A. Risk Factors
There have been no material changes to the risk factors set forth in Part I, Item 1A of the ~~Company's~~Company’s Annual Report on Form 10-K for the year ended December 31, ~~2019, as updated by the risk factor set forth in Part II, Item 1A of the Company’s Quarterly Report on Form 10-Q for the quarterly period ended June 30,~~ 2020.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
On ~~April 18, 2018,~~October 21, 2020, the ~~Company's~~Company’s Board of Directors authorized management to repurchase up to ~~500,000~~1,000,000 shares of the ~~Company's~~Company’s outstanding common stock, under a program of open market purchases or privately negotiated transactions. This program became effective in November 2020 and does not have an expiration date. The authorization of this program terminated the previous repurchase program, which was approved in November 2006 with an authorization to repurchase up to 700,000 shares of the Company's outstanding common stock.

~~The following table reflects the Company’s repurchase activity during the three months ended September 30, 2020.~~

Total Number
of Shares
Purchased
Average
Price
Per Share
Total Number of
Shares Purchased
as Part of Publicly
Announced Plan
Maximum Number
of Shares that May
Yet Be Purchased
Under the Plan(1)

July 1, 2020 – July 31, 2020
—
$             —
—
282,711
August 1, 2020 – August 31, 2020
7,600
38.82
7,600
275,111
September 1, 2020 – September 30, 2020
    198,800
37.34
    198,800
76,311

    206,400
$        37.39
    206,400

~~_______________________~~
~~(1)~~
~~Amount represents the number of shares available to be repurchased under the April 2018 plan as of the last calendar day of the month shown.~~
On October 21, 2020, the Company's Board of Directors authorized management to repurchase up to 1,000,000 shares of the Company's outstanding common stock, under a program of open market purchases or privately negotiated transactions. This program does not have an expiration date. The authorization of this program is effective upon the completion of the purchase of the remaining shares yet to be purchased under the repurchase program authorized in April 2018 discussed above.
From time to time, the Company may utilize a pre-arranged trading plan pursuant to Rule 10b5-1 under the Securities Exchange Act of 1934 to repurchase its shares under its repurchase programs.
The following table reflects the Company’s repurchase activity during the three months ended March 31, 2021.






Total Number of

Maximum Number

Total Number

Average

Shares Purchased

of Shares that May

of Shares

Price

as Part of Publicly

Yet Be Purchased

Purchased

Per Share

Announced Plan

Under the Plan(1)

January 1, 2021 – January 31, 2021

18,559

$
49.29

18,559

917,976
February 1, 2021 – February 28, 2021

55,853

50.87

55,853

862,123
March 1, 2021 – March 31, 2021

453

53.53

453

861,670

74,865

$
50.50

74,865

(1) Amount represents the number of shares available to be repurchased under the current program as of the last calendar day of the month shown.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not applicable
Item 5. Other Information
None.
~~None.~~

66

Item 6. Exhibits

a)
Exhibits
Exhibit No.
Description

(2)
Plan of acquisition, reorganization, arrangement, liquidation, or succession

(i)
The Purchase and Assumption Agreement, dated as of March 20, 2009, among Federal Deposit Insurance Corporation, Receiver of TeamBank, N.A., Paola, Kansas, Federal Deposit Insurance Corporation and Great Southern Bank, previously filed with the Commission (File no. 000-18082) as Exhibit 2.1 to the ~~Registrant's~~Registrant’s Current Report on Form 8-K filed on March 26, 2009 is incorporated herein by reference as Exhibit 2.1(i)..

(ii)
The Purchase and Assumption Agreement, dated as of September 4, 2009, among Federal Deposit Insurance Corporation, Receiver of Vantus Bank, Sioux City, Iowa, Federal Deposit Insurance Corporation and Great Southern Bank, previously filed with the Commission (File no. 000-18082) as Exhibit 2.1 to the ~~Registrant's~~Registrant’s Current Report on Form 8-K filed on September 11, 2009 is incorporated herein by reference as Exhibit 2.1(ii)..

(iii)
The Purchase and Assumption Agreement, dated as of October 7, 2011, among Federal Deposit Insurance Corporation, Receiver of Sun Security Bank, Ellington, Missouri, Federal Deposit Insurance Corporation and Great Southern Bank, previously filed with the Commission (File no. 000-18082) as Exhibit 2.1(iii) to the ~~Registrant's~~Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2011 is incorporated herein by reference as Exhibit 2(iii)..

(iv)
The Purchase and Assumption Agreement, dated as of April 27, 2012, among Federal Deposit Insurance Corporation, Receiver of Inter Savings Bank, FSB, Maple Grove, Minnesota, Federal Deposit Insurance Corporation and Great Southern Bank, previously filed with the Commission (File no. 000-18082) as Exhibit 2.1(iv) to the ~~Registrant's~~Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2012 is incorporated herein by reference as Exhibit 2(iv)..

(v)
The Purchase and Assumption Agreement All Deposits, dated as of June 20, 2014, among Federal Deposit Insurance Corporation, Receiver of Valley Bank, Moline, Illinois, Federal Deposit Insurance Corporation and Great Southern Bank, previously filed with the Commission (File no. 000-18082) as Exhibit 2.1(v) to the ~~Registrant's~~Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 20, 2014 is incorporated herein by reference as Exhibit 2(v)..

(3)
Articles of incorporation and Bylaws

(i)
The ~~Registrant's~~Registrant’s Charter previously filed with the Commission as Appendix D to the ~~Registrant's~~Registrant’s Definitive Proxy Statement on Schedule 14A filed on March 31, 2004 (File No. 000-18082), is incorporated herein by reference as Exhibit ~~3.1~~3.1..

(iA)
The Articles Supplementary to the ~~Registrant's~~Registrant’s Charter setting forth the terms of the ~~Registrant's~~Registrant’s Senior Non-Cumulative Perpetual Preferred Stock, Series A, previously filed with the Commission as Exhibit 3.1 to the ~~Registrant's~~Registrant’s Current Report on Form 8-K filed on August 18, 2011, are incorporated herein by reference as Exhibit 3(i)..

(ii)
The ~~Registrant's~~Registrant’s Bylaws, previously filed with the Commission (File no. 000-18082) as Exhibit 3.2 to the ~~Registrant's~~Registrant’s Current Report on Form 8-K filed on October 19, 2007, are incorporated herein by reference as Exhibit ~~3.2~~3.2..

(4)
Instruments defining the rights of security holders, including indentures

The Indenture, dated June 12, 2020, between the Registrant and U.S. Bank National Association, as Trustee, previously filed with the Commission (File no. 000-18082) as Exhibit 4.1 to the Registrant’s Current Report on Form 8-K filed on June 12, 2020, is incorporated herein by reference as Exhibit 4.1.

67

The First Supplemental Indenture, dated June 12, 2020, between the Registrant and U.S. Bank National Association, as Trustee (relating to the Registrant’s 5.50% Fixed-to-Floating Rate Subordinated Notes due June 15, 2030), including the form of subordinated note included therein, previously filed with the Commission (File no. 000-18082) as Exhibit 4.2 to the Registrant’s Current Report on Form 8-K filed on June 12, 2020, is incorporated herein by reference as Exhibit 4.2.

The Subordinated Indenture, dated as of August 12, 2016, between the Registrant and Wilmington Trust, National Association, as Trustee, previously filed with the Commission (File no. 000-18082) as Exhibit 4.1 to the Registrant’s Current Report on Form 8-K filed on August 12, 2016, is incorporated herein by reference as Exhibit 4.3.

The First Supplemental Indenture, dated as of August 12, 2016, between the Registrant and Wilmington Trust, National Association, as Trustee (relating to the Registrant’s 5.25% Fixed-to-Floating Rate Subordinated Notes due August 15, 2026), including the form of subordinated note included therein, previously filed with the Commission (File no. 000-18082) as Exhibit 4.2 to the Registrant’s Current Report on Form 8-K filed on August 12, 2016, is incorporated herein by reference as Exhibit 4.4.

The Company hereby agrees to furnish the SEC upon request, copies of the instruments defining the rights of the holders of each other issue of the ~~Registrant's~~Registrant’s long-term debt.

(9)
Voting trust agreement

Inapplicable.

(10)
Material contracts

The ~~Registrant's~~Registrant’s 2003 Stock Option and Incentive Plan previously filed with the Commission (File No. 000-18082) as Annex A to the ~~Registrant's~~Registrant’s Definitive Proxy Statement on Schedule 14A filed on April 14, 2003, is incorporated herein by reference as Exhibit ~~10.2~~10.2.*.

The Amended and Restated Employment Agreement, dated November 4, 2019, between the Registrant and William V. Turner previously filed with the Commission (File no. 000-18082) as Exhibit 10.3 to the ~~Registrant's~~Registrant’s Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2019, is incorporated herein by reference as Exhibit ~~10.3~~10.3.*.

The Amended and Restated Employment Agreement, dated November 4, 2019, between the Registrant and Joseph W. Turner previously filed with the Commission (File no. 000-18082) as Exhibit 10.4 to the ~~Registrant's~~Registrant’s Quarterly Report on Form 10-Q for the quarterly period fiscal year ended September 30, 2019, is incorporated herein by reference as Exhibit ~~10.4~~10.4.*.

Amendment No. 1, dated as of March 5, 2020, to the Amended and Restated Employment Agreement with Joseph W. Turner previously filed with the Commission (File no. 000-18082) as Exhibit 10.4A to the ~~Registrant's~~Registrant’s Annual Report on Form 10-K for the year ended December 31, ~~2019~~2020 is incorporated herein by reference as Exhibit ~~10.4A~~10.4A.*.

The form of incentive stock option agreement under the ~~Registrant's~~Registrant’s 2003 Stock Option and Incentive Plan previously filed with the Commission as Exhibit 10.1 to the ~~Registrant's~~Registrant’s Current Report on Form 8-K (File no. 000-18082) filed on February 24, 2005 is incorporated herein by reference as Exhibit ~~10.5~~10.5.*.

The form of non-qualified stock option agreement under the ~~Registrant's~~Registrant’s 2003 Stock Option and Incentive Plan previously filed with the Commission as Exhibit 10.2 to the ~~Registrant's~~Registrant’s Current Report on Form 8-K (File no. 000-18082) filed on February 24, 2005 is incorporated herein by reference as Exhibit ~~10.6~~10.6.*.

A description of the current salary and bonus arrangements for 2020 for the ~~Registrant's~~Registrant’s executive officers previously filed with the Commission as Exhibit 10.7 to the ~~Registrant's~~Registrant’s Annual Report on Form 10-K for the fiscal year ended December 31, ~~2019~~2020 is incorporated herein by reference as Exhibit ~~10.7~~10.7.*.

A description of the current fee arrangements for the ~~Registrant's~~Registrant’s directors previously filed with the Commission as Exhibit 10.8 to the ~~Registrant's~~Registrant’s Annual Report on Form 10-K for the fiscal year ended December 31, ~~2019~~2020 is incorporated herein by reference as Exhibit ~~10.8~~10.8.*.
68

Small Business Lending Fund – Securities Purchase Agreement, dated August 18, 2011, between the Registrant and the Secretary of the United States Department of the Treasury, previously filed with the Commission as Exhibit 10.1 to the ~~Registrant's~~Registrant’s Current Report on Form 8-K filed on August 18, 2011, is incorporated herein by reference as Exhibit ~~10.9~~10.9..

The ~~Registrant's~~Registrant’s 2013 Equity Incentive Plan previously filed with the Commission (File No. 000-18082) as Annex A to the ~~Registrant's~~Registrant’s Definitive Proxy Statement on Schedule 14A filed on April 4, 2013, is incorporated herein by reference as Exhibit ~~10.10~~10.10.*.

The form of incentive stock option award agreement under the ~~Registrant's~~Registrant’s 2013 Equity Incentive Plan previously filed with the Commission as Exhibit 10.2 to the ~~Registrant's Registration Statement on Form S-8 (File no. 333-189497) filed on June 20, 2013 is incorporated herein by reference as~~ ~~Exhibit 10.11~~.
The form of non-qualified stock option award agreement under the Registrant's 2013 Equity Incentive Plan previously filed with the Commission as Exhibit 10.3 to the Registrant's Registration Statement on Form S-8 (File no. 333-189497) filed on June 20, 2013 is incorporated herein by reference as ~~Exhibit 10.12~~.
The form of stock appreciation right award agreement under the Registrant's 2013 Equity Incentive Plan previously filed with the Commission as Exhibit 10.4 to the Registrant's Registration Statement on Form S-8 (File no. 333-189497) filed on June 20, 2013 is incorporated herein by reference as ~~Exhibit 10.13~~.
~~The form of restricted stock award agreement under the Registrant's 2013 Equity Incentive Plan previously filed with the Commission as Exhibit 10.5 to the Registrant's~~Registrant’s Registration Statement on Form S-8 (File no. 333-189497) filed on June 20, 2013 is incorporated herein by reference as Exhibit ~~10.14~~10.11.*.

The ~~Registrant's~~form of non-qualified stock option award agreement under the Registrant’s 2013 Equity Incentive Plan previously filed with the Commission as Exhibit 10.3 to the Registrant’s Registration Statement on Form S-8 (File no. 333-189497) filed on June 20, 2013 is incorporated herein by reference as Exhibit 10.12.*

The Registrant’s 2018 Omnibus Incentive Plan previously filed with the Commission (File No. 000-18082) as Appendix A to the ~~Registrant's~~Registrant’s Definitive Proxy Statement on Schedule 14A filed on March 27, 2018, is incorporated herein by reference as Exhibit ~~10.15~~10.15.*.

The form of incentive stock option award agreement under the ~~Registrant's~~Registrant’s 2018 Omnibus Incentive Plan previously filed with the Commission as Exhibit 10.2 to the ~~Registrant's~~Registrant’s Registration Statement on Form S-8 (File no. 333-225665) filed on June 15, 2018 is incorporated herein by reference as Exhibit ~~10.16~~10.16.*.

The form of non-qualified stock option award agreement under the ~~Registrant's~~Registrant’s 2018 Omnibus Incentive Plan previously filed with the Commission as Exhibit 10.3 to the ~~Registrant's~~Registrant’s Registration Statement on Form S-8 (File no. 333-225665) filed on June 15, 2018 is incorporated herein by reference as Exhibit ~~10.17~~10.17.*.

(15)
Letter re unaudited interim financial information

Inapplicable.

(18)
Letter re change in accounting principles

Inapplicable.

(23)
Consents of experts and counsel

Inapplicable.

(24)
Power of attorney

None.

(31.1)
Rule 13a-14(a) Certification of Chief Executive Officer

Attached as Exhibit 31.1

(31.2)
Rule 13a-14(a) Certification of Treasurer

Attached as Exhibit 31.2

(32)
Certification pursuant to Section 906 of Sarbanes-Oxley Act of 2002 (18 U.S.C. Section 1350)

Attached as Exhibit 3232..
69

(99)
Additional Exhibits

None.

(101)
Attached as Exhibit 101 are the following financial statements from the Great Southern Bancorp, Inc. Quarterly Report on Form 10-Q for the quarter ended ~~September 30, 2020,~~March 31, 2021, formatted in Extensive Business Reporting Language (XBRL): (i) consolidated statements of financial condition, (ii) consolidated statements of income, (iii) consolidated statements of comprehensive income, (iv) consolidated statements of cash flows and (v) notes to consolidated financial statements.

(104)
Cover Page Interactive Data File formatted in Inline XBRL (contained in Exhibit 101).

* Management contract or compensatory plan or arrangement.

~~SIGNATURES~~

70

SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Great Southern Bancorp, Inc.

Date: ~~November~~May 6, ~~2020~~2021
/s/ Joseph W. Turner

Joseph W. Turner
President and Chief Executive Officer
(Principal Executive Officer)

Date: ~~November~~May 6, ~~2020~~2021
/s/ Rex A. Copeland

Rex A. Copeland
Treasurer
(Principal Financial and Accounting Officer)

87

71

		THREE MONTHS ENDED SEPTEMBER 30,
		2020		2019
		(Unaudited)

INTEREST INCOME
Loans	$	50,476	$	57,226
Investment securities and other		3,123		2,961
TOTAL INTEREST INCOME		53,599		60,187

INTEREST EXPENSE
Deposits		7,094		11,792
Short-term borrowings and repurchase agreements		8		1,123
Subordinated debentures issued to capital trust		128		253
Subordinated notes		2,201		1,095
TOTAL INTEREST EXPENSE		9,431		14,263

NET INTEREST INCOME		44,168		45,924
PROVISION FOR LOAN LOSSES		4,500		1,950
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES		39,668		43,974

NON-INTEREST INCOME
Commissions		318		173
Service charges, debit card and ATM fees		4,692		5,619
Net gains on loan sales		2,878		1,021
Late charges and fees on loans		352		364
Gain (loss) on derivative interest rate products		89		(101	)
Other income		1,137		1,579
TOTAL NON-INTEREST INCOME		9,466		8,655

NON-INTEREST EXPENSE
Salaries and employee benefits		18,701		15,827
Net occupancy and equipment expense		7,147		6,613
Postage		748		792
Insurance		753		339
Advertising		757		794
Office supplies and printing		271		258
Telephone		987		904
Legal, audit and other professional fees		582		681
Expense on other real estate and repossessions		199		603
Partnership tax credit investment amortization		-		91
Acquired deposit intangible asset amortization		289		289
Other operating expenses		1,554		1,534
TOTAL NON-INTEREST EXPENSE		31,988		28,725

INCOME BEFORE INCOME TAXES		17,146		23,904
PROVISION FOR INCOME TAXES		3,692		4,172
NET INCOME AND NET INCOME AVAILABLE TO COMMON STOCKHOLDERS	$	13,454	$	19,732

Basic Earnings Per Common Share	$	0.96	$	1.39
Diluted Earnings Per Common Share	$	0.96	$	1.38
Dividends Declared Per Common Share	$	0.34	$	0.34

		NINE MONTHS ENDED SEPTEMBER 30,
		2020			2019
		(Unaudited)

INTEREST INCOME
Loans	$	155,453		$	167,552
Investment securities and other		9,631			8,715
TOTAL INTEREST INCOME		165,084			176,267

INTEREST EXPENSE
Deposits		26,712			33,844
Short-term borrowings and repurchase agreements		667			2,904
Subordinated debentures issued to capital trust		511			787
Subordinated notes		4,633			3,283
TOTAL INTEREST EXPENSE		32,523			40,818

NET INTEREST INCOME		132,561			135,449
PROVISION FOR LOAN LOSSES		14,371			5,500
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES		118,190			129,949

NON-INTEREST INCOME
Commissions		760			670
Service charges, debit card and ATM fees		13,590			15,887
Net gains on loan sales		5,308			1,645
Late charges and fees on loans		1,175			1,066
Net realized gains on sales of available-for-sale securities		78			10
Loss on derivative interest rate products		(424	)		(169	)
Other income		4,606			4,154
TOTAL NON-INTEREST INCOME		25,093			23,263

NON-INTEREST EXPENSE
Salaries and employee benefits		53,699			46,895
Net occupancy and equipment expense		20,619			19,462
Postage		2,294			2,342
Insurance		1,668			1,667
Advertising		1,814			2,162
Office supplies and printing		806			743
Telephone		2,904			2,645
Legal, audit and other professional fees		1,844			2,023
Expense on other real estate and repossessions		946			1,642
Partnership tax credit investment amortization		-			274
Acquired deposit intangible asset amortization		866			902
Other operating expenses		4,691			4,845
TOTAL NON-INTEREST EXPENSE		92,151			85,602

INCOME BEFORE INCOME TAXES		51,132			67,610
PROVISION FOR INCOME TAXES		9,607			11,890
NET INCOME AND NET INCOME AVAILABLE TO COMMON STOCKHOLDERS	$	41,525		$	55,720

Basic Earnings Per Common Share	$	2.94		$	3.93
Diluted Earnings Per Common Share	$	2.93		$	3.90
Dividends Declared Per Common Share	$	2.02		$	1.73

		THREE MONTHS ENDED SEPTEMBER 30, 2019
								Accumulated
								Other
		Common		Additional		Retained		Comprehensive		Treasury
		Stock		Paid-in Capital		Earnings		Income (Loss)		Stock		Total
		(Unaudited)

Balance, June 30, 2019	$	142	$	31,603	$	508,427	$	32,137	$	-	$	572,309
Net income		-		-		19,732		-		-		19,732
Stock issued under Stock Option
Plan		-		482		-		-		167		649
Common dividends declared,		-		-		(4,833)		-		-		(4,833)
$0.34 per share
Other comprehensive gain		-		-		-		8,913		-		8,913
Reclassification of treasury stock
per Maryland law		-		-		167		-		(167)		-

Balance, September 30, 2019	$	142	$	32,085	$	523,493	$	41,050	$	-	$	596,770

		THREE MONTHS ENDED SEPTEMBER 30, 2020
								Accumulated
								Other
		Common		Additional		Retained		Comprehensive		Treasury
		Stock		Paid-in Capital		Earnings		Income (Loss)		Stock		Total
		(Unaudited)

Balance, June 30, 2020	$	141	$	34,230	$	533,346	$	59,011	$	-	$	626,728
Net income		-		-		13,454		-		-		13,454
Stock issued under Stock Option
Plan		-		309		-		-		37		346
Common dividends declared,		-		-		(4,790)		-		-		(4,790)
$0.34 per share
Other comprehensive loss		-		-		-		(3,377)		-		(3,377)
Purchase of the Company’s common stock		-		-		-		-		(7,718)		(7,718)
Reclassification of treasury stock
per Maryland law		(2)		-		(7,679)		-		7,681		-

Balance, September 30, 2020	$	139	$	34,539	$	534,331	$	55,634	$	-	$	624,643

		NINE MONTHS ENDED SEPTEMBER 30, 2019
								Accumulated
								Other
		Common		Additional		Retained		Comprehensive		Treasury
		Stock		Paid-in Capital		Earnings		Income (Loss)		Stock		Total
		(Unaudited)

Balance, January 1, 2019	$	142	$	30,121	$	492,087	$	9,627	$	-	$	531,977
Net income		-		-		55,720		-		-		55,720
Stock issued under Stock Option
Plan		-		1,964		-		-		1,059		3,023
Common dividends declared,		-		-		(24,524)		-		-		(24,524)
$1.39 per share
Purchase of the Company’s common stock		-		-		-		-		(849)		(849)
Other comprehensive gain		-		-		-		31,423		-		31,423
Reclassification of treasury stock
per Maryland law		-		-		210		-		(210)		-

Balance, September 30, 2019	$	142	$	32,085	$	523,493	$	41,050	$	-	$	596,770

		NINE MONTHS ENDED SEPTEMBER 30, 2020
								Accumulated
								Other
		Common		Additional		Retained		Comprehensive		Treasury
		Stock		Paid-in Capital		Earnings		Income (Loss)		Stock		Total
		(Unaudited)

Balance, January 1, 2020	$	143	$	33,510	$	537,167	$	32,246	$	-	$	603,066
Net income		-		-		41,525		-		-		41,525
Stock issued under Stock Option
Plan		-		1,029		-		-		133		1,162
Common dividends declared,		-		-		(28,631)		-		-		(28,631)
$2.02 per share
Other comprehensive gain		-		-		-		23,388		-		23,388
Purchase of the Company’s common stock		-		-		-		-		(15,867)		(15,867)
Reclassification of treasury stock
per Maryland law		(4)		-		(15,730)		-		15,734		-

Balance, September 30, 2020	$	139	$	34,539	$	534,331	$	55,634	$	-	$	624,643

	Nine Months Ended September 30,
	2020		2019
	(In Thousands, Except Per Share Data)

Basic:
Average common shares outstanding		14,119		14,187
Net income and net income available to common stockholders	$	41,525	$	55,720
Per common share amount	$	2.94	$	3.93

Diluted:
Average common shares outstanding		14,119		14,187
Net effect of dilutive stock options – based on the treasury
stock method using average market price		46		110
Diluted common shares		14,165		14,297
Net income and net income available to common stockholders	$	41,525	$	55,720
Per common share amount	$	2.93	$	3.90

	Amounts Reclassified from Accumulated Other
	Comprehensive Income Three Months Ended September 30,		Affected Line Item in the
	2020	2019	Statements of Income
	(In Thousands)

			Net realized gains on sales of
Unrealized gains on available-for- sale securities	$ -	$ -	available-for-sale securities
			(Total reclassified amount before tax)
Income Taxes	-	-	Provision for income taxes
Total reclassifications out of accumulated
other comprehensive income	$ -	$ -

	Amounts Reclassified from Accumulated Other
	Comprehensive Income Nine Months Ended September 30,		Affected Line Item in the
	2020	2019	Statements of Income
	(In Thousands)

			Net realized gains on sales of
Unrealized gains on available-for- sale securities	$ 78	$ 10	available-for-sale securities
��			(Total reclassified amount before tax)
Income Taxes	(18)	(2)	Provision for income taxes
Total reclassifications out of accumulated
other comprehensive income	$ 60	$ 8

		September 30, 2020
														Total Loans
												Total		> 90 Days
		30-59 Days		60-89 Days		90+ Days		Total				Loans		Past Due and
		Past Due		Past Due		Past Due		Past Due		Current		Receivable		Still Accruing
		(In Thousands)

One- to four-family
residential construction	$	79	$	-	$	-	$	79	$	38,424	$	38,503	$	-
Subdivision construction		-		-		-		-		10,466		10,466		-
Land development		236		39		-		275		39,949		40,224		-
Commercial construction		-		-		-		-		1,206,342		1,206,342		-
Owner occupied one- to four-
family residential		336		195		1,922		2,453		475,660		478,113		-
Non-owner occupied one-
to four- family residential		-		-		238		238		117,461		117,699		-
Commercial real estate		100		-		701		801		1,535,642		1,536,443		-
Other residential		-		-		-		-		1,018,359		1,018,359		-
Commercial business		-		-		140		140		439,059		439,199		-
Industrial revenue bonds		-		-		-		-		14,165		14,165		-
Consumer auto		384		45		267		696		98,588		99,284		-
Consumer other		177		6		112		295		41,038		41,333		-
Home equity lines of credit		109		129		457		695		113,662		114,357		-
Loans acquired and accounted
for under ASC 310-30,
net of discounts		331		348		3,966		4,645		101,483		106,128		-
		1,752		762		7,803		10,317		5,250,298		5,260,615		-
Less loans acquired an accountedd for under ASC 310-30,
net of discounts		331		348		3,966		4,645		101,483		106,128		-

Total	$	1,421	$	414	$	3,837	$	5,672	$	5,148,815	$	5,154,487	$	-

	Three Months Ended September 30, 2020				Nine Months Ended September 30, 2020
		Average				Average
		Investment		Interest		Investment		Interest
		in Impaired		Income		in Impaired		Income
		Loans		Recognized		Loans		Recognized
	(In Thousands)

One- to four-family residential construction	$	-	$	-	$	-	$	-
Subdivision construction		22		-		147		3
Land development		-		-		-		-
Commercial construction		-		-		-		-
Owner occupied one- to four-family residential		3,146		44		2,850		124
Non-owner occupied one- to four-family residential		267		-		372		11
Commercial real estate		3,829		30		3,946		97
Other residential		-		-		-		-
Commercial business		538		5		1,008		30
Industrial revenue bonds		-		-		-		-
Consumer auto		889		37		945		77
Consumer other		293		17		281		33
Home equity lines of credit		528		7		535		26

Total	$	9,512	$	140	$	10,084	$	401

	Three Months Ended September 30, 2019				Nine Months Ended September 30, 2019
		Average				Average
		Investment		Interest		Investment		Interest
		in Impaired		Income		in Impaired		Income
		Loans		Recognized		Loans		Recognized
	(In Thousands)

One- to four-family residential construction	$	-	$	-	$	-	$	-
Subdivision construction		269		2		285		7
Land development		83		2		428		101
Commercial construction		-		-		-		-
Owner occupied one- to four-family residential		2,042		23		2,745		80
Non-owner occupied one- to four-family residential		687		14		1,093		32
Commercial real estate		4,427		62		5,217		198
Other residential		-		-		-		-
Commercial business		1,370		7		1,590		65
Industrial revenue bonds		-		-		-		-
Consumer auto		883		21		1,121		64
Consumer other		331		12		399		34
Home equity lines of credit		447		13		318		30

Total	$	10,539	$	156	$	13,196	$	611

		September 30, 2020
						Special
		Satisfactory		Watch		Mention		Substandard		Doubtful		Total
		(In Thousands)

One- to four-family residential
construction	$	37,303	$	1,200	$	-	$	-	$	-	$	38,503
Subdivision construction		10,444		-		-		22		-		10,466
Land development		40,224		-		-		-		-		40,224
Commercial construction		1,206,342		-		-		-		-		1,206,342
Owner occupied one- to four-
family residential		475,479		-		-		2,634		-		478,113
Non-owner occupied one- to four-
family residential		117,141		321		-		237		-		117,699
Commercial real estate		1,480,891		52,496		-		3,056		-		1,536,443
Other residential		1,018,359		-		-		-		-		1,018,359
Commercial business		428,800		10,258		-		141		-		439,199
Industrial revenue bonds		14,165		-		-		-		-		14,165
Consumer auto		98,659		18		-		607		-		99,284
Consumer other		41,003		86		-		244		-		41,333
Home equity lines of credit		113,793		40		-		524		-		114,357
Loans acquired and accounted
for under ASC 310-30,
net of discounts		106,117		-		-		11		-		106,128

Total	$	5,188,720	$	64,419	$	-	$	7,476	$	-	$	5,260,615

		Nine Months Ended			Nine Months Ended
		September 30, 2020			September 30, 2019
		(In Thousands, Except Per Share Data and Basis Points Data)

Impact on net interest income/
net interest margin (in basis points)	$	4,632	12 bps	$	5,162	15 bps
Net impact to pre-tax income	$	4,632		$	5,162
Net impact net of taxes	$	3,576		$	3,985
Impact to diluted earnings per share	$	0.25		$	0.28

		At or For the Nine Months Ended
		September 30, 2020		September 30, 2019
		(In Thousands)
Statement of Financial Condition
Operating leases right of use asset	$	8,758	$	8,888
Operating leases liability	$	8,869	$	8,952

Statement of Income
Operating lease costs classified as occupancy and equipment expense	$	1,182	$	1,092
(includes short-term lease costs and amortization of right of use asset)

Supplemental Cash Flow Information
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	1,149	$	1,028
Right of use assets obtained in exchange for lease obligations:
Operating leases	$	972	$	9,538

Collateral Type	# of Loans Modified		$ of Loans Modified		Interest Only 3 Months		Interest Only 4-6 Months		Interest Only 7-12 Months		Full Payment Deferral 3 Months		Full Payment Deferral 6 Months	Weighted Average Loan to Value

Retail	12	$	47.8	$	—	$	5.3	$	36.1	$	2.9	$	3.5	57%
Multifamily	8		78.4		7.6		46.3		24.4		0.1		—	71%
Healthcare	7		56.3		—		9.6		11.3		—		35.4	66%
Hotel/Motel	13		105.4		20.8		34.6		10.5		—		39.5	68%
Office	9		31.3		—		24.0		4.3		3.0		—	44%
Warehouse/Other	10		15.7		3.7		—		—		—		12.0	61%
Restaurants	9		15.2		—		3.7		—		—		11.5	55%
Commercial Business	15		16.4		5.2		—		5.5		—		5.7
Land	5		12.2		11.3		—		0.9		—		—
Total Commercial	88		378.7		48.6		123.5		93.0		6.0		107.6

Residential Mortgage	53		11.0		—		—		—		2.1		8.9	68%
Consumer	354		5.8		—		—		—		0.2		5.6
Total Consumer	407		16.8		—		—		—		2.3		14.5

Total	495	$	395.5	$	48.6	$	123.5	$	93.0	$	8.3	$	122.1

Collateral Type		Outstanding Balance of Loans of This Collateral Type	Percentage of Loans Modified To Total Loans of This Collateral Type	Percentage of Loans Modified To Total Loans	Percentage of Loans of This Collateral Type to Total Loans	Weighted Average Loan to Value of Loans in This Collateral Type

Retail	$	388.0	12%	1%	11%	61%
Healthcare		284.3	28%	2%	8%	59%
Hotel/Motel		196.2	29%	2%	5%	56%
Multifamily		988.0	11%	3%	27%	63%
Office		274.8	11%	1%	7%	68%
Warehouse/Other		282.4	6%	<1%	8%	57%
Commercial Business(1)		242.2	6%	<1%	7%
Restaurants		72.0	23%	<1%	2%	59%
Land		67.2	18%	<1%	2%	59%
Total Commercial		2,795.1	14%	10%	76%

Residential Mortgage		619.5	2%	<1%	17%	71%
Consumer		254.1	2%	<1%	7%
Total Consumer		873.6	2%	<1%	24%

Total	$	3,668.7	11%	11%	100%

(1) The Commercial Business outstanding loan balance excludes PPP loans of $121.1 million.

		Beginning Balance, January 1		Additions to Non- Performing		Removed from Non- Performing		Transfers to Potential Problem Loans			Transfers to Foreclosed Assets and Repossessions			Charge- Offs			Payments			Ending Balance, September 30
		(In Thousands)
One- to four-family construction	$	—	$	—	$	—	$	—		$	—		$	—		$	—		$	—
Subdivision construction		—		—		—		—			—			—			—			—
Land development		—		—		—		—			—			—			—			—
Commercial construction		—		—		—		—			—			—			—			—
One- to four-family residential		1,477		1,245		—		(143	)		—			—			(419	)		2,160
Other residential		—		—		—		—			—			—			—			—
Commercial real estate		632		107		—		—			—			—			(38	)		701
Commercial business		1,235		—		—		—			—			—			(1,095	)		140
Consumer		1,175		370		—		(85	)		(89	)		(164	)		(371	)		836

Total	$	4,519	$	1,722	$	—	$	(228	)	$	(89	)	$	(164	)	$	(1,923	)	$	3,837

		Beginning Balance, January 1		Additions to Potential Problem		Removed from Potential Problem		Transfers to Non- Performing			Transfers to Foreclosed Assets and Repossessions			Charge- Offs			Payments			Ending Balance, September 30
		(In Thousands)
One- to four-family construction	$	—	$	—	$	—	$	—		$	—		$	—		$	—		$	—
Subdivision construction		—		24		—		—			—			—			(2	)		22
Land development		—		—		—		—			—			—			—			—
Commercial construction		—		—		—		—			—			—			—			—
One- to four-family residential		791		143		—		(83	)		—			—			(138	)		713
Other residential		—		—		—		—			—			—			—			—
Commercial real estate		3,078		559		—		—			—			—			(1,282	)		2,355
Commercial business		—		—		—		—			—			—			—			—
Consumer		512		401		—		(36	)		(59	)		(102	)		(178	)		538

Total	$	4,381	$	1,127	$	—	$	(119	)	$	(59	)	$	(102	)	$	(1,600	)	$	3,628

		Beginning Balance, January 1		Additions		Sales			Capitalized Costs		Write- Downs			Ending Balance, September 30
		(In Thousands)
One- to four-family construction	$	—	$	—	$	—		$	—	$	—		$	—
Subdivision construction		689		—		(455	)		126		(10	)		350
Land development		1,816		—		(365	)		—		(376	)		1,075
Commercial construction		—		—		—			—		—			—
One- to four-family residential		601		—		(601	)		—		—			—
Other residential		—		—		—			—		—			—
Commercial real estate		—		—		—			—		—			—
Commercial business		—		—		—			—		—			—
Consumer		545		957		(1,306	)		—		—			196

Total	$	3,651	$	957	$	(2,727	)	$	126	$	(386	)	$	1,621

	September 30, 2020(2)		Three Months Ended September 30, 2020								Three Months Ended September 30, 2019
	Yield/ Rate		Average Balance			Interest		Yield/ Rate		Average Balance			Interest		Yield/ Rate
	(Dollars in Thousands)
Interest-earning assets:
Loans receivable:
One- to four-family residential	3.72	%	$	680,452		$	7,379	4.31	%	$	542,892		$	7,153	5.23	%
Other residential	4.22			989,574			11,301	4.54			814,326			11,074	5.40
Commercial real estate	4.17			1,545,358			16,850	4.34			1,471,431			19,236	5.19
Construction	4.28			649,985			7,450	4.56			730,027			10,814	5.88
Commercial business	3.70			356,505			3,663	4.09			253,225			3,316	5.20
Other loans	5.24			270,136			3,645	5.37			369,704			5,423	5.82
Industrial revenue bonds(1)	4.45			15,345			188	4.87			14,770			210	5.64

Total loans receivable	4.28			4,507,355			50,476	4.46			4,196,375			57,226	5.41

Investment securities(1)	2.99			449,383			3,060	2.71			342,277			2,534	2.94
Other interest-earning assets	0.24			270,509			63	0.09			79,344			427	2.13

Total interest-earning assets	3.96			5,227,247			53,599	4.08			4,617,996			60,187	5.17
Non-interest-earning assets:
Cash and cash equivalents				92,244							93,293
Other non-earning assets				147,084							202,361
Total assets			$	5,466,575						$	4,913,650

Interest-bearing liabilities:
Interest-bearing demand and savings	0.29		$	1,962,023			1,650	0.33		$	1,501,697			2,030	0.54
Time deposits	1.19			1,602,981			5,444	1.35			1,728,620			9,762	2.24
Total deposits	0.67			3,565,004			7,094	0.79			3,230,317			11,792	1.45
Short-term borrowings, repurchase agreements and other interest-bearing liabilities	0.02			159,373			8	0.02			289,222			1,123	1.54
Subordinated debentures issued to capital trusts	1.85			25,774			128	1.98			25,774			253	3.90
Subordinated notes	5.85			148,113			2,201	5.91			74,119			1,095	5.86

Total interest-bearing liabilities	0.85			3,898,264			9,431	0.96			3,619,432			14,263	1.56
Non-interest-bearing liabilities:
Demand deposits				888,568							670,158
Other liabilities				45,123							37,754
Total liabilities				4,831,955							4,327,344
Stockholders’ equity				634,620							586,306
Total liabilities and stockholders’ equity			$	5,466,575						$	4,913,650

Net interest income:
Interest rate spread	3.11	%				$	44,168	3.12	%				$	45,924	3.61	%
Net interest margin*								3.36	%						3.95	%
Average interest-earning assets to average interest- bearing liabilities				134.1	%						127.6	%

	Three Months Ended September 30,
	2020 vs. 2019
		Increase (Decrease)						Total
		Due to						Increase
		Rate			Volume			(Decrease)
		(Dollars in Thousands)
Interest-earning assets:
Loans receivable	$	(10,712	)	$	3,962		$	(6,750	)
Investment securities		(210	)		736			526
Other interest-earning assets		(685	)		321			(364	)
Total interest-earning assets		(11,607	)		5,019			(6,588	)
Interest-bearing liabilities:
Demand deposits		(893	)		513			(380	)
Time deposits		(3,650	)		(668	)		(4,318	)
Total deposits		(4,543	)		(155	)		(4,698	)
Short-term borrowings		(766	)		(349	)		(1,115	)
Subordinated debentures issued to capital trust		(125	)		—			(125	)
Subordinated notes		9			1,097			1,106
Total interest-bearing liabilities		(5,425	)		593			(4,832	)
Net interest income	$	(6,182	)	$	4,426		$	(1,756	)

		September 30, 2020		June 30, 2020		March 31, 2020		December 31, 2019		December 31, 2018		December 31, 2017
Closed non-construction loans with unused available lines
Secured by real estate (one- to four-family)	$	160,409	$	158,687	$	156,381	$	155,831	$	150,948	$	133,587
Secured by real estate (not one- to four-family)		19,295		16,124		16,832		19,512		11,063		10,836
Not secured by real estate - commercial business		114,519		105,071		79,117		83,782		87,480		113,317

Closed construction loans with unused available lines
Secured by real estate (one-to four-family)		33,359		37,789		50,101		48,213		37,162		20,919
Secured by real estate (not one-to four-family)		714,566		753,589		809,436		798,810		906,006		718,277

Loan Commitments not closed
Secured by real estate (one-to four-family)		94,203		112,769		141,432		69,295		24,253		23,340
Secured by real estate (not one-to four-family)		50,264		73,103		95,652		92,434		104,871		156,658
Not secured by real estate - commercial business		800		800		—		—		405		4,870

	$	1,187,415	$	1,257,932	$	1,348,951	$	1,267,877	$	1,322,188	$	1,181,804